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Proving that continuing to apply logic to the thinking process (yes, the principles dating back to
Aristotle that were adapted and advanced by Eliyahu M. Goldratt in our modern age) can improve it
substantially, H. William Dettmers new edition of his landmark book, Goldratts Theory of Constraints,
reflects the evolution of the thinking process to its current level: the Logical Thinking Process. Make
no mistake: the majority of heavy lifting to elevate the thinking process has been done by Dettmer
himself. Goldratt once told me that he did not write anything of depth about the thinking process
(TP). Instead, he left it to the few brave and uniquely qualified educators, of whom Dettmer has risen
to the forefront. This new edition teaches how leaders can face down real-life issues by employing the
rigorous deductive logic hes honed to perfection by repeated application: how a better quality Current
Reality Tree (CRT) can be created in less time. New material includes a chapter on changing the status
quo. If theres one Dettmer book to own ahead of all others, it is The Logical Thinking Process.
Jeff SKI Kinsey, Jonah
Throughput Press
Hilton Head Island, SC
Where would the logical approach to problem solving espoused by TOC proponents be without Bill
Dettmer? Is logical thinking so simple that a cave man might be able to do it? Is it common sense, that
we need not overthink it? I would argue neither. The Logical Thinking Process clearly demonstrates that
a thorough, logical approach can be used not only to identify complex problems and find potential
solutions, but also to generate buy-in among those individuals who must bring about improvement
in the organization as well as provide support for the process of planning and implementing effective
solutions. Bills dedication, experience, and motivation to develop the necessary tools for this problemsolving approach have been invaluable to both practitioners and academicians. He goes about it in
such a thoughtful, unrelenting, and disciplined way that his work has effectively defined the field
of study.
J. Wayne Patterson, Ph.D.
Professor of Operations Management
Clemson University
After years of thinking, applying, re-thinking, and modifying, we have now Bill Dettmers most
recent update, documenting those years of experience with verbalizing intuition into clear logic and
applying it to business. This process facilitates clarification of thoughts, the challenge of hidden
assumptions, identification of real root causes, and rational prediction of what could happen in the
future. This is all based on logic and common sense; there is no believe me it works. All managers
who use this book will find themselves better prepared to think logically, without losing any of their
own intuition. Is there anything more important for managers to be doing? Read this book carefully
it could be very important to you.
Eli Schragenheim
Elyakim Management Systems, Ltd.
Dont buy this book if you believe that gut feel is the perfect tool for leaders to use in deciding what
they should do and what their people should do. However, if you are looking for a box of logical
decision-making tools to use in setting goals, deciding how they should be achieved, and leading the
execution of your plan, then this book must be on the top of your desk daily. It is the reference for the
tools of constraint managementthe leadership discipline that focuses on finding and resolving
system constraints.
Dieter Legat, Ph.D.
Managing Director
Delta Institute
Geneva, Switzerland
Dettmer has made an important contribution to competitive strategy by writing what is, as far as
I know, the first book to unify and demonstrate the power of both the Logical Thinking Process
developed by Goldratt and the OODA loop (observe-orient-decide-act). Operating together, they will
be very, very hard to beat.
Chet Richards, Ph.D.
Author of Certain to Win and an international expert on the philosophy of John Boyd
When I started reading The Logical Thinking Process, I couldnt easily put it aside. There are a lot of new
insights in this book, even for those who are already familiar with previous books on the Theory of
Constraints. Bill does not simply tell the story of the logical thinking tools (as invented by someone
else). He creates his own story of the thinking tools. He introduces a new tool, the Intermediate

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Objectives Map, which brilliantly dissolves many difficulties that people might have had with the
other tools. He merges the Prerequisite Tree and Transition Tree into a more useful Prerequisite Tree,
and he dissects the 3-UDE Cloud.
He is at his best with this book, and you will feel the experience of decades of consulting and teaching.
Working through the book is the next best thing to attending one of his thinking process classes in
person. Get the book, take your time to read through it, be patient, and reap the benefits from your
increased understanding and the streamlined method.
Christoph Steindl, Ph.D.
Managing Director, Catalysts GmbH
Linz, Austria
The Logical Thinking Process is the most comprehensive, easy-to-follow, step-by-step guide to finding
real solutions to problems I face in business every day. Dettmer has created the definitive guide for
applying the Logical Thinking Process that Goldratt created. If you really want to find the key leverage
points to fundamentally improve your business, The Logical Thinking Process will give you the tools to
achieve your goal.
Christopher M. Zephro
Director, Supply Chain
Seagate Technology
I find Bill to be the worlds most articulate exponent of the thinking process tools of the Theory of
Constraints and very much enjoy the experience and knowledge he brings to his writing style. This
book manages to be precise without being pedantic, and entertaining without losing sight of the
seriousness of the topic. The book works both as a grand overview of a systems approach to complex
problem solving and as a practical chapter-by-chapter guide to the tools and techniques of rational
thinking. If youre wondering how best to structure, test, and communicate your reasoning, then read
Bills book.
David V. Hodes, Managing Director
TOC Center of Australia (TOCCA)
Sydney, Australia
This is a complete guide for the Logical Thinking Process (TP). It embodies the latest thinking about
logical thinking. It covers all modes of TP application, from personal problem solving to strategic
development, and from corporate problem solving to legal applications of the thinking process. In
teaching this thinking process in Japan, I have personally witnessed phenomenal development of
students capabilities to solve problems and visualize the interactions of whole systems. This book is
Bill Dettmers gift for humanity.
Haruyuki Uchiyama, President
MoreThroughput.com
Japan
The topics that are a must-read are the Intermediate Objectives Map and Current Reality Tree. There
is a basic research in these areas that can be invaluable to the reader. The chapter on the Intermediate
Objectives Map provides an excellent guide for understanding undesirable effects and selecting them
effectively. This improves the quality of the Current Reality Tree significantly.
Sadashiv S Pandit
Executive Chairman
Fleetguard Filters Private Limited
India
The Logical Thinking Process is a practical guide to improving any systems performance, from one of
the clearest authors in the field of the Theory of Constraints. It quickly gets to the heart of major
concepts and techniques, and updates prior readers of the literature with the latest developments.
Many standard tools for continuous improvement fail to achieve noteworthy results at a macro level.
Why? Because too often, the problems to which the tools are applied are local in nature. The tools, and
the problems to which they are applied, do not address the greatest constraints holding back the
system as a whole. In The Logical Thinking Process, leaders and improvement teams are given a concrete
method for creating the kind of major turnaround that todays crises so often demand.
The Logical Thinking Process is a must-have tool in the arsenal of any continuous improvement effort.
Paul H. Selden, Ph. D.
Founder and President, Performance Management, Inc.

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The Logical
Thinking Process
A Systems Approach to
Complex Problem Solving

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Also available from ASQ Quality Press:


Breaking the Constraints to World-Class Performance
H. William Dettmer
Strategic Navigation: A Systems Approach to Business Strategy
H. William Dettmer
Enterprise Process Mapping: Integrating Systems for Compliance and Business Excellence
Charles G. Cobb
Root Cause Analysis: Simplified Tools and Techniques, Second Edition
Bjrn Andersen and Tom Fagerhaug
The Certified Quality Process Analyst Handbook
Eldon H. Christensen, Kathleen M. Coombes-Betz, and Marilyn S. Stein
Making Change Work: Practical Tools for Overcoming Human Resistance to Change
Brien Palmer
Business Process Improvement Toolbox, Second Edition
Bjrn Andersen
Business Performance through Lean Six Sigma: Linking the Knowledge Worker, the Twelve
Pillars, and Baldrige
James T. Schutta
The Process-Focused Organization: A Transition Strategy for Success
Robert A. Gardner
Inside Knowledge: Rediscovering the Source of Performance Improvement
David Fearon & Steven A. Cavaleri
Decision Process Quality Management
William D. Mawby
Defining and Analyzing a Business Process: A Six Sigma Pocket Guide
Jeffrey N. Lowenthal
Avoiding the Corporate Death Spiral: Recognizing and Eliminating the Signs of Decline
Gregg Stocker
To request a complimentary catalog of ASQ Quality Press publications, call 800-2481946, or visit our Web site at http://qualitypress.asq.org.

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The Logical
Thinking Process
A Systems Approach to
Complex Problem Solving

H. William Dettmer

ASQ Quality Press


Milwaukee, Wisconsin

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American Society for Quality, Quality Press, Milwaukee, WI 53203


2007 by H. William Dettmer
All rights reserved. Published 2007.
Printed in the United States of America.
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Library of Congress Cataloging-in-Publication Data


Dettmer, H. William.
The logical thinking process : a systems approach to complex problem solving /
H. William Dettmer.
p. cm.
A total re-write, more than a second edition, of his Goldratts Theory of Constraints, c1997.
Accompanied by a compact disk that contains a full-function, unrestricted copy of version 1.0 of
Transformation Logic Tree software.
ISBN 978-0-87389-723-5
1. Decision support systems. 2. Problem solving. 3. Theory of constraints (Management)
4. Decision trees--Computer programs. 5. Industrial management. I. Dettmer, H. William.
Goldratts theory of constraints. II. Title. III. Title: Systems approach to complex problem solving.
HD30.213.D48 2007
658.4'03--dc22
2007026109
No part of this book may be reproduced in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without the prior written permission of the publisher.
Publisher: William A. Tony
Acquisitions Editor: Matt T. Meinholz
Project Editor: Paul OMara
Production Administrator: Randall Benson
ASQ Mission: The American Society for Quality advances individual, organizational, and
community excellence worldwide through learning, quality improvement, and knowledge
exchange.
Attention Bookstores, Wholesalers, Schools, and Corporations: ASQ Quality Press books,
videotapes, audiotapes, and software are available at quantity discounts with bulk purchases for
business, educational, or instructional use. For information, please contact ASQ Quality Press at
800-248-1946, or write to ASQ Quality Press, P.O. Box 3005, Milwaukee, WI 53201-3005.
To place orders or to request a free copy of the ASQ Quality Press Publications Catalog, including
ASQ membership information, call 800-248-1946. Visit our Web site at www.asq.org or
http://qualitypress.asq.org.
Printed on acid-free paper

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For Doris Herron, Jean Hardman, and Marjorie Ebeling.


All for one, and one for all.

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Table of Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

xxv

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxvii
PART I THE DESTINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 1
Introduction to the Theory of Constraints . . . . . . . . . . . . . . . . . . . . .
Systems and Profound Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Systems Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Managers Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Who Is a Manager? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What Is the Goal? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goal, Critical Success Factor, or Necessary Condition? . . . . . . . . . . . . . . . . . . .
The Concept of System Constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Systems as Chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Weakest Link . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Constraints and Non-constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Production Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Relation of Constraints to Quality Improvement . . . . . . . . . . . . . . . . . . . . . . . .
Change and the Theory of Constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOC Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Systems as Chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Local vs. System Optima . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cause and Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undesirable Effects and Critical Root Causes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Solution Deterioration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Physical vs. Policy Constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ideas Are NOT Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Five Focusing Steps of TOC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Identify the System Constraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Decide How to Exploit the Constraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Subordinate Everything Else . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Elevate the Constraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Go Back to Step 1, but Beware of Inertia . . . . . . . . . . . . . . . . . . . . . . . . . . .

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viii Table of Contents

Throughput, Inventory, and Operating Expense . . . . . . . . . . . . . . . . . . . . . . . . .


Throughput (T) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory/Investment (I) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Expense (OE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Which Is Most Important: T, I, or OE? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
T, I, and OE: An Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
T, I, and OE in Not-for-Profit Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Universal Measures of Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Passive Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Active Inventory (Investment) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Managing T Through Undesirable Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The TOC Paradigm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Applications and Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Drum-Buffer-Rope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Chain Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Replenishment and Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Throughput Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Logical Thinking Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Intermediate Objectives Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Evaporating Cloud: A Conflict Resolution Diagram . . . . . . . . . . . . . . . . . .
The Future Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Transition Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Categories of Legitimate Reservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Logical Tools as a Complete Thinking Process . . . . . . . . . . . . . . . . . . . . .
Figure 1.19: The Six Logical Tools as an Integrated Thinking Process . . . . . . .

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Chapter 2
Categories of Legitimate Reservation . . . . . . . . . . . . . . . . . . . . . . . . .
Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Use This Chapter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of the Categories of Legitimate Reservation . . . . . . . . . . . . . . . . . .
1. Clarity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why Clarity Comes First . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What Clarity Means . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Entity Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Completeness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Causality Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Cause Insufficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Ellipse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Relative Magnitude of Dependent Causes . . . . . . . . . . . . . . . . . . . . . . .
How Many Arrows? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Concept of Oxygen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Additional Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Magnitude . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Unique Variation of Additional Cause . . . . . . . . . . . . . . . . . . . . . . . .

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ix

Complex Causality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What Is It? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cause Sufficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conceptual AND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Magnitudinal AND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exclusive OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Symbols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Cause-Effect Reversal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Fishing Is Good Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Statistical Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Medical Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Predicted Effect Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conflict or Differences in Magnitude? . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible or Intangible? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Verbalizing Predicted Effect Existence . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Tautology (Circular Logic) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Baseball Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vampire Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Using the CLR in a Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CLR Known by All . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CLR Known Only by the Tree-Builder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sufficiency-Based vs. Necessity-Based Logic Trees . . . . . . . . . . . . . . . . . . . . . . .
Symbols and Logic Tree Conventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three Reasons to Standardize . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ergonomics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscommunication of Logic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Standard Symbol Set . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Standard Convention for Logical Connections . . . . . . . . . . . . . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 2.36: Categories of Legitimate Reservation:
Self-Scrutiny Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46
46
46
46
46
47
47
48
49
49
49
49
50
50
51
52
54
55
56
56
56
57
58
58
59
59
59
60
60
60
61
62
64

Chapter 3
Intermediate Objectives Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Use This Chapter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
System Boundaries, Span of Control, and Sphere of Influence . . . . . . . . . . . . .
Span of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sphere of Influence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The External Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Control vs. Influence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Doing the Right Things vs. Doing Things Right . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Who Sets the Goal? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Success Factors and Necessary Conditions . . . . . . . . . . . . . . . . . . . . . .

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68
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69
69
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70
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Description of the Intermediate Objectives (IO) Map . . . . . . . . . . . . . . . . . . . . .


Strategic Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Hierarchy of Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IO Maps Are Unique . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Characteristics of the IO Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Examples of Strategic Intermediate Objectives Maps . . . . . . . . . . . . . . . . . . . . .
Process-Level IO Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
System-Level IO Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Construct an Intermediate Objectives (IO) Map . . . . . . . . . . . . . . . . . .
1. Define the System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Determine the System Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Determine the Critical Success Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Determine the Key Necessary Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Arrange the IO Map Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Connect the Goal, Critical Success Factors, and Necessary Conditions . . . . .
7. Verify the Connections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The 10,000-Foot Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Enlist Outside Scrutiny of the Entire IO Map . . . . . . . . . . . . . . . . . . . . . . . .
Figure 3.14: Procedures for Constructing an Intermediate Objectives (IO)
Map abbreviated checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 3.15: Example: A Real-World IO Map . . . . . . . . . . . . . . . . . . . . . . . . . . . .

72
73
73
74
75
76
76
76
76
76
78
79
80
82
82
83
85
85
86
87
88

PART II GAP ANALYSIS AND CORRECTION . . . . . . . . . . . . . . . . . . . . . . . . . .

89

Chapter 4
Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Use This Chapter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of the Current Reality Tree (CRT) . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Single Tool or Part of a Set . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Span of Control and Sphere of Influence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Correlation vs. Cause and Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Predicting Rain in Siberia: A Simple Example of Correlation . . . . . . .
Fibromyalgia and Myofascial Pain: A Complex
Real-World Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undesirable Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undesirable by What Standard? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Identify and Check for Undesirability . . . . . . . . . . . . . . . . . . .
Existence in Reality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why the Emphasis on UDEs? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Root Causes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core Problems and Root Causes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The 70 Percent Criterion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inability to Act on a Core Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Solution to the Core Problem Conundrum . . . . . . . . . . . . . . . . . . . .
Critical Root Cause: A Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Main Body of the CRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Archetypical CRTs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depicting a Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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92
93
94
94
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97
98
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Entities in a Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Arrows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Underlying Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ellipses, Magnitudinal ANDs, and Exclusive ORs . . . . . . . . . . . . . . . .
Ellipses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Magnitudinal ANDs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exclusive ORs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variations on a Theme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Numbering Entities in a Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Most Common Logical Errors in a Sufficiency Tree . . . . . . . . . . . . . . . . . .
Clarity in the Arrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dont Induce Confusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dont Miss Opportunities to Break the Chain of Cause and Effect . . . .
Cause Insufficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Concept of Oxygen Revisited . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Entity Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reading a Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negative Reinforcing Loops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reading a Negative Reinforcing Loop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Construct a Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gather Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Define the System to be Modeled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Determine the Undesirable Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compare Reality with Benchmarks of System Success . . . . . . . . . . . .
Create a Starting Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Determine the First Two Levels of Causality . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer UDEs and Causes to Post-it Notes . . . . . . . . . . . . . . . . . . . . . .
4. Begin the Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Improve the Logic of the Initial Clusters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Identify Possible Additional Causes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Two Criteria for Additional Causes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Look for Lateral Connections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Build the Cause-and-Effect Chains Downward . . . . . . . . . . . . . . . . . . . . . . . .
9. Scrutinize the Entire Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Decide Which Root Causes to Attack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scrutinizing the Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Categories of Legitimate Reservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Techniques for Shortstopping Logical Challenges . . . . . . . . . . . . . . . . . . . . . .
When All or None Are Not Acceptable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inclusive and Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Qualifying Words . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Too Many Arrows? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Simple Logical Aid #1: Means, Method, and Motivation . . . . . . . . . . . . . . . . . .
Simple Logical Aid #2: The Syllogism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Using the CRT with Other Parts of the Thinking Process . . . . . . . . . . . . . . . . .
The Current Reality Tree and the Evaporating Cloud . . . . . . . . . . . . . . . . . . . . .
The Current Reality Tree and the Future Reality Tree . . . . . . . . . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 4.45: Procedures for Constructing a Current Reality Tree (CRT)
abbreviated checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 4.46: Current Reality Tree: Fordyce Corporation . . . . . . . . . . . . . . . . . . .

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112
112
113
114
115
115
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118
119
119
120
121
122
122
124
125
126
127
128
128
129
129
130
130
131
131
133
134
135
136
137
138
140
140
140
141
141
141
142
143
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146
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Chapter 5
Evaporating Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Use This Chapter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of the Evaporating Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Nature of Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conflict Is Not Always Obvious . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Two Types of Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Opposite Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Different Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compromise, Win-Lose or Win-Win? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compromise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Win-Lose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Win-Win . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An Indication of Hidden Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Breakthrough Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Elements of the Evaporating Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Symbology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prerequisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How the Evaporating Cloud Relates to the Current Reality Tree . . . . . . . . . . . .
Why Do Root Causes of Undesirable Effects Exist? . . . . . . . . . . . . . . .
Policies and Constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy Constraints: A Source of Conflict . . . . . . . . . . . . . . . . . . . . . . . . .
Conflict is Usually Embedded in the CRT . . . . . . . . . . . . . . . . . . . . . . .
Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Invalid Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Some Assumptions Can Be Invalidated . . . . . . . . . . . . . . . . . . . . . . . . .
Win-Win vs. Win-Lose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Five Potential Break Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Invalid Assumptions: An Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Injections: The Role of Invalid Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How Are Injections Related to Assumptions? . . . . . . . . . . . . . . . . . . . .
Injections: Actions or Conditions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Silver Bullets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Creating Breakthrough Ideas to Resolve Conflict . . . . . . . . . . . . . . . . . . . . . .
All Arrows Are Fair Game . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Is the Idea Feasible? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reading an Evaporating Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Verbalizing Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What to Remember About Evaporating Clouds . . . . . . . . . . . . . . . . . . . . . . . . .
How to Construct An Evaporating Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Nine-Step Path to Conflict Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Construct a Blank Evaporating Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Articulate the Conflicting Wants of Each Side . . . . . . . . . . . . . . . . . . . . . .
3. Determine the Needs of Each Side . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Easy Way to Articulate Requirements . . . . . . . . . . . . . . . . . . . . .
4. Formulate the Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why Use an Intermediate Objectives Map? . . . . . . . . . . . . . . . . . . . . . .

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161
161
162
162
163
163
163
163
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163
164
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164
164
165
165
166
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169
171
171
171
172
172
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173
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5. Evaluate the Whole Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


6. Develop Underlying Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Extreme Wording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Evaluate Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Create Injections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Select the Best Injection(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scrutinizing An Evaporating Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reflection of Current Reality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Perception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 5.32: Procedures for Constructing an Evaporating Cloud
abbreviated checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 5.33: Evaporating Cloud: Master Blank Form . . . . . . . . . . . . . . . . . . . . .
Figure 5.34: Evaporating Cloud: Wurtzburg Corporation . . . . . . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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192
192
194
195
195
197
197
198
199
202
203
204

Chapter 6
Future Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Use This Chapter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of the Future Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Real-World Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Framework for Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negative Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Positive Reinforcing Loop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Future Reality Tree Symbology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Injections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Injections: Actions or Conditions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Risk of Actions as Injections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Build Upward, from Injections to Desired Effects . . . . . . . . . . . . . . . . . . . . . . . .
Example: Building a House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multiple Injections: The Silver Bullet Fallacy . . . . . . . . . . . . . . . . . . . . . . . . .
Where Injections Come From . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Future Reality Tree and Other Thinking Process Trees . . . . . . . . . . . . . . . .
The Future Reality Tree and the Current Reality Tree . . . . . . . . . . . . .
The Logical Structure of Reality, Current and Future . . . . . . . . . . . . . .
The Future Reality Tree and the Evaporating Cloud . . . . . . . . . . . . . .
The Future Reality Tree and the Prerequisite Tree . . . . . . . . . . . . . . . .
The Future Reality Tree as a Safety Net . . . . . . . . . . . . . . . . . . . . . . .
Negative Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Using the Negative Branch as a Stand-Alone . . . . . . . . . . . . . . . . . .
Added Realities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trimming Negative Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
When to Raise Negative Branch Reservations . . . . . . . . . . . . . . . . . . . .
Positive Reinforcing Loops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strategic Planning with a Future Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Construct a Future Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Gather Necessary Information and Materials . . . . . . . . . . . . . . . . . . . . . . . . .
2. Formulate Desired Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Positive, Not Neutral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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207
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208
209
209
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211
211
213
214
215
216
216
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Use Present Tense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Lay Out Desired Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Add the Injection(s) and Evaporating Cloud Requirements . . . . . . . . . . . . . .
Where Do We Find Injections? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Injections at the Bottom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Fill in the Gaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Build Upward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Continue Building from the Expected Effects . . . . . . . . . . . . . . . . . . . .
5. Build in Positive Reinforcing Loops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Look for Negative Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Develop Negative Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Trim Negative Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Incorporate the Branch-Trimming Injection into the FRT . . . . . . . . . . . . .
10. Scrutinize the Entire FRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scrutinizing a Future Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Existence Reservations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scrutinizing Injections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oxygen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 6.27: Procedures for Constructing a Future Reality Tree . . . . . . . . . . . .
Figure 6.28: Using the Negative Branch as a Stand-Alone Tool . . . . . . . . . . . .
Figure 6.29: Future Reality Tree Example: Fordyce Corporation . . . . . . . . . . .

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240
241
241
242
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242
243
243
243
244
248
252

PART III EXECUTING CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

259

Chapter 7
Prerequisite and Transition Trees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Consolidation of Two Trees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Use This Chapter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of the Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Necessity vs. Sufficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depicting a Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intermediate Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Different Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Not Always a One-to-One Relationship . . . . . . . . . . . . . . . . . . . . . . . . .
Obstacles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overcome, Not Obliterate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Enlist Assistance to Identify Obstacles . . . . . . . . . . . . . . . . . . . . . . . . . .
A Single Tool or Part of a Set . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intermediate Objectives: Actions or Conditions? . . . . . . . . . . . . . . . . . . . . . . . .
Obstacles: Always Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sequence Dependency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parallelism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reading a Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Top to Bottom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bottom to Top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

261
262
263
264
264
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265
265
267
267
268
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270
270
271
272
272
272
273
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Building a Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


1. Determine the Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Identify All Intermediate Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Surface All Possible Obstacles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Organize the Intermediate Objectives and Obstacles . . . . . . . . . . . . . . . . . . .
5. Sequence the Intermediate Objectives Within Each Branch . . . . . . . . . . . . . .
6. Connect the Intermediate Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Overcome the Obstacles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Integrate the Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Connect the Main Body of the Tree to the Objective . . . . . . . . . . . . . . . . . . . .
10. Scrutinize the Entire Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scrutinizing a Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Entity Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cause Sufficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The IO-Obstacle Validity Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Transition Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Little History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prerequisite Tree and Transition Tree: Original Concept . . . . . . . . . . . . . . . . . .
Transition Tree Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Five-Element Transition Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In Search of Robust Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Managing Change as a Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Chain Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What Critical Chain Project Management Does . . . . . . . . . . . . . . . . . .
What Critical Chain Project Management Requires . . . . . . . . . . . . . . .
A Three-Phase Change Management Framework . . . . . . . . . . . . . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 7.31: Procedures for Constructing a Prerequisite Tree . . . . . . . . . . . . . .
Figure 7.32: Prerequisite Tree Self-Scrutiny Checklist . . . . . . . . . . . . . . . . . . . . .
Figure 7.33: Prerequisite Tree: Conference Planning and Management . . . . . .

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290
291
291
292
292
294
294
295
297
299
300
300
300
300
301
301
302
304
307
308

Chapter 8
Changing the Status Quo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Use This Chapter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Key to System Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Elements of System Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Human Behavior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Active Resistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Passive Resistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Is Behavior Logical? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changing Minds, or Changing Behavior? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why Do People Resist Change? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maslow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Herzberg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
McClelland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Anaclitic Depression Blues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security or Satisfaction? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

311
312
312
313
313
314
315
315
315
316
316
316
317
317
318
318
318
319
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xvi Table of Contents

The Impact on Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leadership Is About People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leadership and the Blitzkrieg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Personal Professional Skill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Moral Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Level 5 Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leadership and Behavior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Leaders Behavior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinates Behavior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Creating and Sustaining Desired Behaviors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Behavior Change is a Leadership Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Behavioral Approach to Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rewards or Reinforcement? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A General Strategy for Implementing Change . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Common Scenario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How Change Gets In . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Leader as Change Agent-in-Chief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Model for Implementing Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. Leader Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Modified Behavior Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Mission/Task Charter Communicated . . . . . . . . . . . . . . . . . . . . . . . .
4. Leader Commitment Demonstrated . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Subordinate Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Performance Management Process . . . . . . . . . . . . . . . . . . . . . . . . . . .
A Last Thought about Ensuring Effective Change . . . . . . . . . . . . . . . . . . . . . . .
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

320
322
322
323
323
323
324
324
325
325
327
328
328
329
329
330
331
331
331
323
323
333
335
335
335
336
336
336
336
337

Epilogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

339

Appendices
Appendix A: Strategic Intermediate Objectives Map . . . . . . . . . . . . . . . . . . . . .
Appendix B: Executive Summary Trees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix C: Current Reality Tree Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix D: Evaporating Cloud Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix E: The 3-UDE Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix F: The Challenger Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix G: Correlation Versus Cause and Effect . . . . . . . . . . . . . . . . . . . . . . .
Appendix H: Theories of Motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix I: Legal Application of the Thinking Process . . . . . . . . . . . . . . . . . . .
Appendix J: Transformation Logic Tree Software . . . . . . . . . . . . . . . . . . . . . . . .

341
343
356
357
359
369
376
377
382
394

Glossary of Thinking Process Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

397

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

401

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

405

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List of Illustrations

Figure 1.1
Figure 1.2
Figure 1.3
Figure 1.4
Figure 1.5
Figure 1.6
Figure 1.7
Figure 1.8
Figure 1.9
Figure 1.10
Figure 1.11
Figure 1.12
Figure 1.13
Figure 1.14
Figure 1.15
Figure 1.16
Figure 1.17
Figure 1.18
Figure 1.19

A basic system and its environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Goal or critical success factor? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A system: the chain concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A production example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Another version of the production example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Who is working on a non-constraint? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partial list of TOC principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Definitions of Throughput, Inventory, and Operating Expense . . . . . . . . . . . . . . . . . . . . .
Limits to T, I and OE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management priorities with T, I, and OE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
T, I, and OE in a not-for-profit organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Intermediate Objectives Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Evaporating Cloud (conflict resolution diagram) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Future Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Transition Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How the logic trees relate to four management questions about change . . . . . . . . . . . . .
The six logical tools as an integrated Thinking Process . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4
7
8
9
10
11
13
16
18
18
20
23
24
25
26
27
28
29
30

Figure 2.1
Figure 2.2
Figure 2.3
Figure 2.4
Figure 2.5
Figure 2.6
Figure 2.7
Figure 2.8
Figure 2.9
Figure 2.10
Figure 2.11
Figure 2.12
Figure 2.13
Figure 2.14
Figure 2.15
Figure 2.16
Figure 2.17
Figure 2.18
Figure 2.19
Figure 2.20
Figure 2.21

A test and example of the clarity reservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Completeness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Structure: compound entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Structure: embedded if-then . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A test and example of the entity existence reservation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Causality existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible vs. intangible causes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A test and example of the causality existence reservation . . . . . . . . . . . . . . . . . . . . . . . . .
Indicating cause sufficiency with an ellipse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How many contributing causes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The concept of oxygen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A test and example of the cause insufficiency reservation . . . . . . . . . . . . . . . . . . . . . . . . .
Additional cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variation of additional cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A test and example of the additional cause reservation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Simple causality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conceptual AND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Magnitudinal AND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exclusive OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35
36
36
37
38
39
39
40
41
41
42
43
44
44
45
46
46
47
47
48
49

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xviii List of Illustrations

Figure 2.22
Figure 2.23
Figure 2.24
Figure 2.25
Figure 2.26
Figure 2.27
Figure 2.28
Figure 2.29
Figure 2.30
Figure 2.31
Figure 2.32a
Figure 2.32b
Figure 2.33
Figure 2.34
Figure 2.35
Figure 2.36

The fishing is good example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Combined fishing is good example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A test and example of the cause-effect reversal reservation . . . . . . . . . . . . . . . . . . . . . . . .
Example of applying the predicted effect existence reservation . . . . . . . . . . . . . . . . . . . .
Predicted effect: verifying an intangible cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Another predicted effect: verifying a tangible cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A test and example of the predicted effect existence reservation . . . . . . . . . . . . . . . . . . . .
Tautology (circular logic) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Circular logic (tangible cause) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A test and example of the circular logic reservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thinking Process as an engineering flowchart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thinking Process as a logic tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standard logic tree symbols . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standard logical conventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Two versions of a prerequisite tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Categories of legitimate reservation: self-scrutiny checklist . . . . . . . . . . . . . . . . . . . . . . . .

49
50
51
53
54
54
55
56
57
57
60
61
62
63
64
65

Figure 3.1
Figure 3.2
Figure 3.3
Figure 3.4
Figure 3.5
Figure 3.6
Figure 3.7
Figure 3.8
Figure 3.9
Figure 3.10
Figure 3.11
Figure 3.12
Figure 3.13
Figure 3.14

71
72
73
74
75
77
78
79
80
81
82
83
84

Figure 3.15

System boundary, span of control, and sphere of influence . . . . . . . . . . . . . . . . . . . . . . . .


Necessary conditions: prerequisites to critical success factors . . . . . . . . . . . . . . . . . . . . . .
Necessary conditions: a vertical hierarchy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strategic Intermediate Objectives (IO) Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The nested hierarchy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production process IO Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Not-for-profit IO Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goal statements (examples) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical success factors (examples) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Necessary conditions (examples) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convert goal, CSFs, and NCs to logic tree entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arrange logic tree entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Strategic-level IO Maps (examples) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Procedures for constructing an Intermediate Objectives (IO) Map
abbreviated checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Example: a real-world IO Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 4.1
Figure 4.2
Figure 4.3
Figure 4.4
Figure 4.5
Figure 4.6
Figure 4.7
Figure 4.8
Figure 4.9
Figure 4.10
Figure 4.11
Figure 4.12
Figure 4.13
Figure 4.14
Figure 4.15
Figure 4.16
Figure 4.17
Figure 4.18
Figure 4.19
Figure 4.20
Figure 4.21
Figure 4.22
Figure 4.23
Figure 4.24
Figure 4.25
Figure 4.26
Figure 4.27

The Current Reality Tree (CRT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


CRT: plant growth (example) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CRT: temperature in a house (example) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Span of control, sphere of influence, and the CRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rainfall in Siberia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undesirable effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undesirable effects: do they really exist? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Root causes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identifying root causes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The fallacy of V-shaped connections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A new way to conceive of system problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CRT symbology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cause-effect relationships and underlying assumptions . . . . . . . . . . . . . . . . . . . . . . . . . .
Ellipses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indicating cause sufficiency with an ellipse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indicating magnitudinal effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indicating exclusive causality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Various causal configurations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cause-effect tree numbering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adding entities after numbers have been assigned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The long arrow (clarity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Insufficient Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The concept of oxygen (revisited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The buffalo effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regret factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reading a Sufficiency Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Negative reinforcing loop: the IH example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Figure 4.28
Figure 4.29
Figure 4.30
Figure 4.31
Figure 4.32
Figure 4.33
Figure 4.34
Figure 4.35
Figure 4.36
Figure 4.37
Figure 4.38
Figure 4.39
Figure 4.40
Figure 4.41
Figure 4.42
Figure 4.43
Figure 4.44
Figure 4.45
Figure 4.46

Large paper required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Step 1: Define the system to be modeled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 2: Determine the undesirable effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 3: Determine the first two levels of causality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 4: Begin the Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 5: Improve the logic of the initial clusters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Logic trees are like real trees (convergence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 6: Check for additional causes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Verify possible additional causes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 7: Look for lateral connections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 8: Build the cause-and-effect chains downward . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The finished Current Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All or none: a sliding scale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combining qualifiers in effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Too many arrows? Other possible configurations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Means, method, and motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The syllogism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Procedures for constructing a Current Reality Tree (CRT) abbreviated checklist . . . . .
Current Reality Tree: Fordyce Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Figure 5.1
Figure 5.2
Figure 5.3
Figure 5.4
Figure 5.5
Figure 5.6
Figure 5.7
Figure 5.8
Figure 5.9
Figure 5.10
Figure 5.11
Figure 5.12
Figure 5.13
Figure 5.14
Figure 5.15
Figure 5.16
Figure 5.17
Figure 5.18
Figure 5.19
Figure 5.20
Figure 5.21
Figure 5.22
Figure 5.23
Figure 5.24
Figure 5.25
Figure 5.26
Figure 5.27
Figure 5.28
Figure 5.29
Figure 5.30
Figure 5.31
Figure 5.32
Figure 5.33
Figure 5.34

The Evaporating Cloud (conflict resolution diagram) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Evaporating cloud symbology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An example of an objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Objectives depend on requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prerequisites satisfy requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An example of conflicting prerequisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The EC: a slice of the whole pie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tripartite conflict: who has final authority for medical treatment? . . . . . . . . . . . . . . . . . .
The CRT: a negative branch of reality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The EC is partially embedded in the CRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Break points: arrows indicate hidden underlying assumptions . . . . . . . . . . . . . . . . . . .
Invalid assumptions: an example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conflict resolved: an example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Injections and invalid assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Injections: actions or conditions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to read an Evaporating Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to verbalize assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 1: Construct a blank Evaporating Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 2: Articulate the conflicting wants of each side . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 3: Determine the needs of each side . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Where do requirements come from? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 4: Formulate the objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Objective and requirements come from the IO Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Evaporating Clouds often overlay multiple cause-effect levels . . . . . . . . . . . . . . . . . . . . .
Develop underlying assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Another way to surface underlying assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finding invalid assumptions (separating the wheat from the chaff) . . . . . . . . . . . . . . .
The alternative environment technique . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The injection: condition or action? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Evaporating Cloud: reward systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Procedures for constructing an Evaporating Cloud (EC) abbreviated checklist . . . . . .
Evaporating Cloud (EC) master blank form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Evaporating Cloud: Wurtzburg Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Figure 6.1
Figure 6.2
Figure 6.3
Figure 6.4
Figure 6.5
Figure 6.6

The Future Reality Tree (FRT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


A real-world example: the Immigration Reform and Control Act of 1986 . . . . . . . . . . . .
A framework for change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Example of a negative branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Example of a positive reinforcing loop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Future Reality Tree symbology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Figure 6.7
Figure 6.8
Figure 6.9
Figure 6.10
Figure 6.11
Figure 6.12
Figure 6.13
Figure 6.14
Figure 6.15
Figure 6.16
Figure 6.17
Figure 6.18
Figure 6.19
Figure 6.20
Figure 6.21
Figure 6.22
Figure 6.23
Figure 6.24
Figure 6.25
Figure 6.26
Figure 6.27
Figure 6.28
Figure 6.29

Injections: actions or conditions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Critical root causes: a stimulant for injections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sources of injections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undesirable effects determine desired effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The FRT retains the same basic structure as the CRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The FRT logically verifies injections from an Evaporating Cloud . . . . . . . . . . . . . . . . . . .
Connecting the dots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Future Reality Tree as a bridge to implementation . . . . . . . . . . . . . . . . . . . . . . . . . .
Negative branch: an example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trimming a negative branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incorporating a trimmed-off negative branch into a Future Reality Tree . . . . . . . . . . .
Positive reinforcing loop: an example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 1: Gather all necessary information and materials . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 2: Formulate the desired effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FRT branch structure is similar to the CRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 3: Add injection(s) and Evaporating Cloud requirements . . . . . . . . . . . . . . . . . . . . .
Step 4: Fill in the gaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add injections to maintain forward progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Search for negative branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Develop the negative branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Procedures for constructing a Future Reality Tree (FRT) abbreviated checklist . . . . . .
Using the negative branch (NB) as a stand-alone tool abbreviated checklist . . . . . . . .
Future Reality Tree: Fordyce Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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252

Figure 7.1
Figure 7.2
Figure 7.3
Figure 7.4
Figure 7.5
Figure 7.6
Figure 7.7
Figure 7.8
Figure 7.9
Figure 7.10
Figure 7.11
Figure 7.12
Figure 7.13
Figure 7.14
Figure 7.15
Figure 7.16
Figure 7.17
Figure 7.18
Figure 7.19
Figure 7.20
Figure 7.21
Figure 7.22
Figure 7.23
Figure 7.24
Figure 7.25
Figure 7.26
Figure 7.27
Figure 7.28
Figure 7.29
Figure 7.30
Figure 7.31
Figure 7.32
Figure 7.33

Prerequisite Tree (PRT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Sufficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Necessity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Prerequisite Tree and the Future Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obstacles and intermediate objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multiple intermediate objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actions and conditions: when to use which? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sequence dependency in a Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parallelism in a Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Verbalizing Prerequisite Trees: top to bottom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Verbalizing Prerequisite Trees: bottom to top . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 1: Determine the objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 2: Identify all intermediate objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 3: Surface all possible obstacles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 4: Organize the intermediate objectives and obstacles . . . . . . . . . . . . . . . . . . . . . . . .
Step 5: Sequence the intermediate objectives within each branch . . . . . . . . . . . . . . . . . . .
Step 6: Connect the intermediate objectives within each branch . . . . . . . . . . . . . . . . . . . .
Step 7: Overcome the obstacles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 8: Integrate the branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Step 9: Connect the main body of the PRT to the objective . . . . . . . . . . . . . . . . . . . . . . . . .
Entity existence in a Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cause sufficiency in a Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional cause in a Prerequisite Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The IO-obstacle validity test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Converting a Prerequisite Tree to a PERT chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Relationship between Prerequisite and Transition Trees . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transition Tree structure (original) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The modified Transition Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A three-phase change management framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Converting a Prerequisite Tree to a Critical Chain Project Network . . . . . . . . . . . . . . . . .
Procedures for constructing a Prerequisite Tree (PRT) abbreviated checklist . . . . . . . .
Prerequisite Tree self-scrutiny checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prerequisite Tree: conference planning and management . . . . . . . . . . . . . . . . . . . . . . . . . .

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Figure 8.1
Figure 8.2
Figure 8.3
Figure 8.4
Figure 8.5
Figure 8.6
Figure 8.7
Figure 8.8
Figure 8.9
Figure 8.10

The system improvement Future Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Maslows hierarchy of needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Elements of motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to achieve happiness: Efrats Cloud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Elements of the blitzkrieg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An Intermediate Objectives Map: the elements of effective leadership . . . . . . . . . . . . . .
Behavior, consequences, and reinforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leadership and behavior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A change implementation model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The O-O-D-A Loop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

314
318
319
321
324
326
330
333
334
337

Figure A.1
Figure B.1
Figure B.2
Figure B.3
Figure B.4
Figure B.5
Figure B.6

Sam Spady Foundation strategic Intermediate Objectives Map . . . . . . . . . . . . . . . . . . . .


Complete your Current or Future Reality Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Isolate the executives most important UDEs/DEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Replicate the UDEs and Critical Root Causes on a blank sheet . . . . . . . . . . . . . . . . . . . . .
Identify the major paths between critical root causes or injections and UDEs/DEs . . . .
Replicate the causal paths on the Executive Summary Tree . . . . . . . . . . . . . . . . . . . . . . . .
Transfer convergence/divergence entities from the
CRT/FRT to the Executive Summary Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identify key intermediate entities in each branch of the CRT/FRT . . . . . . . . . . . . . . . . . .
Replicate the intermediate entities in the Executive Summary Tree . . . . . . . . . . . . . . . . .
Finalize the Executive Summary Tree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paginate the original CRT or FRTcreate a map of pages . . . . . . . . . . . . . . . . . . . . . . . . .
Bring out only the segments required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Articulating the conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Determine the requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Formulate the common objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Develop the underlying assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Create injections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
An engineered solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prerequisite Tree: Uniform Trade Sequence Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Reality Tree: Marston Oil v. Wilson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transformation Logic Tree software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

342
345
346
346
347
348

Figure B.7
Figure B.8
Figure B.9
Figure B.10
Figure B.11
Figure F.1
Figure F.2
Figure F.3
Figure F.4
Figure F.5
Figure F.6
Figure I.1
Figure I.2
Figure J.1

349
350
351
352
353
354
371
371
372
373
374
375
384
385
395

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Preface

ooks are snapshots in time. The previous edition of this book, Goldratts Theory of
Constraints (GTOC), was a snapshot of the state of the art of the Thinking Process
in 1996. But time passes, and people and things evolve. The Thinking Process is
no exception.
Since 1996, Ive applied the Thinking Process in commercial companies, government
agencies, and not-for-profit organizations. And Ive taught it to people throughout the
United States, South America, Europe, Japan, Korea, and Australia. In each of these
consulting and teaching engagements, GTOC was the basis of my work.
But over time I began to notice a developing tendency: I was diverging from the
techniques and procedures Id established in GTOC. In teaching, I found that I needed to
modify the procedures for constructing the logic trees in order to overcome difficulties that
some students had in learning to apply them. In my own applications, I found that the
need to quickly develop more robust trees gradually drew me away from the procedures
in the first edition.
This shouldnt be surprising. The Thinking Process was relatively new and still
evolving when I wrote GTOC. Any new methodology can be improved. Yet GTOC still
stood as a snapshot in time. In teaching Thinking Process courses, I began to supplement
GTOC with a three-ring binder containing newer guidance and examples. By 2005, I had
so transformed the way I taught the Thinking Process that GTOC became an adjunct to
my courses, supporting the three-ring binder, rather than the other way around.
The transformation of the Thinking Process over the past ten years has been a good
thing. In 1996, most people teaching the Thinking Processincluding merequired ten
days to cover it all. With some innovations, I found that I could include more material in
six days than I originally could in ten, and still finish early. In 2006, I decided it was time
to incorporate what Ive learned about faster and better ways to teach and apply the
Thinking Process into a new edition of GTOC.
But as I began to edit the original text of GTOC, I realized just how substantial the
changes would be. It turned out to be far more than just an update of the 1996 version
it was a whole new approach to building and applying logic trees. For that reason alone,
merely calling this book a second edition of GTOC would have been an inaccurate
representation of the content, comparable to calling a 2006 Ford automobile Model T,
second edition.

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xxiv Preface

Moreover, while the Thinking Process has its roots in the Theory of Constraints, it
has since realized a much broader applicability in system analysis and systems thinking.
Much as some trademarked brand names (e.g., Kleenex, Google, Post-it Notes, Scotch
tape, and so on) enjoy a kind of evolution to generic usage over time, so too has the
Thinking Process as a methodology become more of a generic logical analysis process. So
its appropriate to title this book in a way that conveys the broader applicability of the
methodto characterize it as what it is: the Logical Thinking Process, a systems-level approach
to policy analysis. At the risk of hyperbole, I would go so far as to say its the most powerful
such methodology yet created.
None of this alters the fact that this marvelous logical method was created and
introduced by Eliyahu M. Goldratt as a means of identifying and breaking policy
constraints. Though the principles of deductive logic date back to the days of Aristotle, it
took Goldratt to make them more than just a topic of curiosity and academic interest. The
Thinking Process is probably the first widely-used, practical tool for the application of
deductive logic, and its users should not forget that Goldratt made this possible.
A major contribution of real value that this book offers users of the Thinking Process
is software. Anyone who has used the Thinking Process for long knows what a challenge
this is. When Goldratt first introduced the Thinking Process, computer-based graphics
programs capable of rendering the logic trees were few, far between, and expensive. For the
first several years, the only way to build and present Thinking Process trees involved using
Post-it Notes connected by hand-drawn lines on flip-chart paper taped to walls. In the
mid-1990s, a variety of drawing and flowcharting programs became available for both
Macintosh computers and and IBM PCs, but they were relatively expensive and they didnt
lend themselves directly to Thinking Process applications. Icons needed to be created or
modified, and standardization of symbols was consequently almost nonexistent.
In 2006, I was privileged to meet Dr. Mark Van Oyen, a professor of engineering at the
University of Michigan, who had begun development of a unique graphical software
applicationone that was designed primarily to create Thinking Process logic trees, and
only secondarily for other flowcharting uses. Dr. Van Oyen and I came to a meeting of the
minds on incorporating that software, Transformation Logic Tree, with this book. The
compact disk provided here contains a full-function, unrestricted copy of version 1.0 for
new and experienced users of the Thinking Process alike to use in building their logic
trees. Appendix J includes more information on how to install and use the software.
This book contains new examples of logic trees from a variety of real-world
applications. Most of the diagrams and illustrations are new and improved. Explanations
and procedures for constructing the logic trees are considerably simplified.
Yet notwithstanding all these improvements, the Thinking Process still requires
concerted effort to learn and apply well. A book like this cant be all things to all people.
Simply reading a book wont make you an expert in the Thinking Process. Only regular,
repetitive practice can do that. And specialized training from someone who thoroughly
understands (and has effective teaching skills) is advisable in order to realize maximum
benefit. These can also compress the learning curve from months to days.
Even so, youre still likely to have questions that this book doesnt adequately address.
I encourage readers to contact me directly with any such questions, as well as with
comments, pro or con, about the book. How else can things improve?
H. William Dettmer
Port Angeles, Washington, USA
authors@asq.org

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Acknowledgments

ny book such as this is the culmination of effort by more people than just the author
alone. I would be remiss if I failed to recognize those dedicated, consummate
professionals who have helped me in a variety of ways to create the book youre
reading now.
This help starts with ten years of feedback from Thinking Process students and
practitioners who are too numerous to nameand Id undoubtedly slight some by
forgetting to mention them if I tried. For the review of parts or all of the manuscript of this
book, Im indebted to (in reverse alphabetical order), Christopher Zephro, Haruyuki
Uchiyama, Christoph Steindel, Paul Selden, Timothy Sellan, Chet Richards, Wayne
Patterson, Sadashiv Pandit, Dieter Legat, Larry Leach, David Hodes, and Jerry Harvey.
I am also indebted to Stephen F. Kaufman, hanshi 10th dan, who graciously shared
with me his understanding of the Way of the Warrior as expressed in the writings and
life of Miyamoto Musashi, the prototypical samurai.
The high-quality production of this book would not have been possible without the
initiating efforts of Matt Meinholz and Paul OMara at Quality Press; Janet Sorensen, who
created this layout and superbly rendered my initial drawings into the crisp, clean
illustrations you find here; and Linda Presto, whose eagle-eye copyediting and superlative
skill in constructing the indispensable, invaluable index helped deliver the truly
professional result you hold in your hand.
Mark Van Oyen earns my deep appreciation for contributing the Transformation Logic
Tree software to the efforts of aspiring Thinking Process practitioners, and for his
willingness to see it included with this book.
Finally, none of us would have the Thinking Process at all if not for the creativity of
Eli Goldratt.

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Introduction

hats really new in this book that warrants a change in the title? First, Ive
learned how to streamline the process of constructing the logic trees while
simultaneously ensuring that the results are more logically sound and closer
representations of reality than ever before. Whereas Current Reality Trees (CRT) once took
several days to complete, a better-quality tree is now possible in a matter of several hours.
When used as part of an integrated Thinking Process, all of the trees are now more
precisely and seamlessly aligned with one another.
This better integration is possible because of a new application of an old (and little
used) tree: the Intermediate Objectives (IO) Map. An hour or less spent perfecting an
IO Map at the beginning shaves days off completion of the rest of the process, and the
results are much more robust. So, with this book, the IO Map takes its place as the first step
in the Thinking Process.
A second major change is in the relationship between the Evaporating Cloud and the
Current Reality Tree. As Goldratt originally conceived the Thinking Process, these two
trees enjoyed a close logical relationship, but it was frequently a difficult transition.
Sometime in the late 1990s, a number of Thinking Process practitioners began using an
approach to analyzing problems called the 3-UDE Cloud.* The 3-UDE Cloud was then
used to create something called a communication current reality tree. This combination
of the Evaporating Cloud and the Current Reality Tree certainly streamlined the process
of creating these two trees in many situations, but this process is logically flawed (and
often myopic). I found the results of this process to be incomplete, too narrowly focused,
and not really representative of a systems larger issues. It certainly did offer some
efficiencies and economies over the Thinking Process as originally described in GTOC
though at the expense of logical quality and robustness. This book explains the
deficiencies of the 3-UDE Cloud to communication CRT approach in Appendix E.
Chapter 5 explains an easier, more logically sound way to integrate the Current Reality
Tree with the Evaporating Cloud.
A third major change is a reorientation of solution implementation. In the original
incarnation of the Thinking Process, injections (ideas for solutions) from the Future Reality
Tree went through two subsequent steps: a Prerequisite Tree to help identify and
overcome obstacles, and a Transition Tree to flesh out the step-by-step implementation
plan. One of the phenomena I noticed over the past decade was the tendency for students
* UDE is an acronym for undesirable effect.
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learning the Thinking Process to incorporate much more detail into the Prerequisite Tree
than it was originally intended to have. And at the same time, there was less patience
with the often mind-numbing detail of the Transition Tree.
As an experiment in one Thinking Process course, I suggested that students dispense
with the Transition Tree altogether and instead incorporate more detail into their
Prerequisite Trees. Not only did implementations become faster and easier, but there was
no deterioration in their quality. And everyone preferred this approach because of its
speed. Because almost without exception the people I work with are competent
professionals, its no problem for them to execute change from comprehensive
Prerequisite Trees alone. The Transition Tree became superfluous.
Yet there was still an opportunity to realize some synergy among tools in change
execution. The Theory of Constraints offers the best improvement to project scheduling
and management methods conceived in the past 50 years: critical chain. Since the new
Prerequisite Tree identifies all the activities needed to execute a change as intermediate
objectives, its a natural next step to use it to create a project activity network. These
activities can be implemented using Critical Chain Project Management. So, this version
of the Thinking Process retires the Transition Tree in favor of the marriage of a more
detailed Prerequisite Tree and Critical Chain Project Management.
Theres another elephant in the parlor that attends any system improvement
methodology, including (but not limited to) the Thinking Process: change management. The
challenge of changing existing ways of doing things, which is really what the Thinking
Process is designed to facilitate, goes far beyond logic. Its necessary, but not sufficient, to
create technically and economically sound solutions to problems. But even so, some
estimates of failure run as high as 80 percent. Theres a reason why many major systemic
changes fail to realize expectations fully, or fail outright. The missing sufficiency is the
failure of most methods, including the Thinking Process, to inherently address the
psychology of change. Theory of Constraints philosophy has touched on this challenge
before, but only in a superficial way (that is, the so-called layers of resistance). Most
methods, such as Six Sigma and lean, dont address it at all.
Yet with potentially valuable solutions falling by the wayside because system
improvers fail to consider the psychology of change, its somewhat surprising that more
methods dont aggressively deal with this problem. Ive tried to start that process in
Chapter 8, Changing the Status Quo. But its only a start. The psychology of change is
a field unto itself. All I can do in this book is to point you in the right direction and provide
a push start.
There are two components to this push. The first is the concept of the executive
summary tree, a tool for reducing complete, complex Thinking Process analysis to a
streamlined version that can be presented succinctly to an executive in a limited period of
time, without compromising the logical soundness of the analysis. The second is a
six-stage model for handling the psychology of change. Executive summary trees are
described in detail in Appendix B. The behavioral change model is introduced in Chapter 8.
This book is organized to take you from the general to the specific, following a triedand-true scientific systems analysis approach developed at the Rand Corporation in the
1950s by E. S. Quade. The approach begins with a determination of the desired system
outcome, defines the problem, creates alternatives, tests those alternatives, and determines
the best alternative according to a predetermined decision rule. However, the traditional
systems analysis approach stops short of implementation. This book goes the extra mile.
Its divided into three major parts.
Part I, The Destination, sets the stage, the ground rules, and the expected outcome.
In Chapter 1, we start with an overview of systems thinking and constraint management
in particular, including the principles of constraint theory and its major tools. Chapter 2

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Introduction

xxix

begins our more detailed examination of the Thinking Process with an explanation of the
Categories of Legitimate Reservationthe logical rules of the game. After all, we cant
excel at the game if we dont know the rules.
Chapter 3 starts our comprehensive exploration of the Thinking Process itself.
Following Quades scientific systems analysis approach, we learn how the Intermediate
Objectives Map is used to establish the standard for desired performance of our system:
the goal, critical success factors, and supporting necessary conditions.
Part II, Gap Analysis and Correction, defines the magnitude of the divide between
the existing system and the aforementioned expected outcome. In Chapter 4, we learn
how to construct a Current Reality Tree to express the gap as undesirable effects (UDEs)
and logically trace the path back to critical root causes for these UDEs. Chapter 5 describes
the resolution of conflict associated with changing the critical root causes, and Chapter 6
lays out proposed solutions for logical testing and bulletproofing (consideration of the
law of unintended consequences).
Part III, Executing Change, addresses the implementation of the new direction that
was logically tested in Chapter 6. Construction of the Prerequisite Tree, Chapter 7,
provides the framework of an execution plan and shows how Critical Chain Project
Management can help with the technical aspects of implementation. However, as Will
Rogers once observed, Plans get you into things, but youve got to work your own way
out. Chapter 8 emphasizes the importance of a concerted effort to accommodate the
human element in change. The Thinking Process may be necessary, but its not sufficient
alone. And while Chapter 8 cant provide more than a survey of change management
techniques, it does offer an introduction to some human-oriented aids to consider.
Finally, nine appendices provide real-world examples, exercises, and deeper insight
into the Logical Thinking Process. And the tenth appendix introduces the Transformation
Logic Tree software included with this book.
Its difficult for any book to be all things to all people. This one is as comprehensive
as I can make it. It can supplement formal training, facilitate self-study, and be a
continuing desk reference. Or it can be a dandy doorstop. Which it will be for you is for
you alone to determine.
Without the assistance of a teacher many roads become open to
a practitioner, some on the correct path and some on the incorrect
path. It is not for everyone to be without guidanceonly a few,
and they are exceptional, can make a journey to wisdom without
a teacher. You must have extraordinary passion, patience, and selfdiscipline to make a journey alone. The goals must be understood,
and no diversion can be acknowledged or permitted if you are to
attain enlightenment within the sphere of a chosen art. This is
a very difficult road to travel and not many are made for it. It is
frustrating, confusing, very lonely, certainly frightening, and it will
sometimes make you think you do not have much sanity left to
deal with the everyday surroundings of your world. Also, there is
no guarantee that you will attain perfection. It must all come from
inside you without any preconceived notions on your part.
And so we begin
Miaymoto Musashi (1643)
(The Book of Five Rings, translated by
Stephen F. Kaufman, hanshi 10th dan)

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Page 1

Part I
The Destination

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1
Introduction to the
Theory of Constraints
My system improves
(more and more).
[DESIRED EFFECT]

Positive
Reinforcing
Loop #1

I am (more and more)


determined to act.
(SELF-DISCIPLINE)
Positive
Reinforcing
Loop #2

...then...
I have, and know how
to use, tools/procedures
to improve the system.
(METHOD)

I am (more and more)


empowered to
improve my system.
(POTENTIAL)
I accept responsibility
for action.
(ACCOUNTABILITY)

If...
I have (more and more)
sufficient understanding of
my system, or access to it.
(CONTENT KNOWLEDGE)

...and...

...and...

I have influence in
changing my system.
(AUTHORITY)

Adapted from Dettmer, Breaking the Constraints


to World-Class Performance (1998)

I desire (more and


more) to improve
my system.
(MOTIVATION)

INJECTION
Success is
reinforced/rewarded.

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4 Chapter One

Profound knowledge must come from outside the system, and


by invitation.
W. Edwards Deming

SYSTEMS AND PROFOUND KNOWLEDGE


W. Edwards Deming maintained that real quality improvement isnt possible without
profound knowledge.7:94-98 According to Deming, profound knowledge comes from:
An understanding of the theory of knowledge
Knowledge of variation
An understanding of psychology
Appreciation for systems

En

al t
rn en
te m
Ex iron
v

En Ex
vi ter
ro n
nm al
en
t

Appreciation for systemswhat does that mean? A system might be generally defined
as a collection of interrelated, interdependent components or processes that act in concert
to turn inputs into some kind of outputs in pursuit of some goal (see Figure 1.1). Systems
influenceand are influenced bytheir external environment. Obviously, quality (or lack
of it) doesnt exist in a vacuum. It can only be considered in the context of the system in
which it resides. So, to follow Demings line of reasoning, its not possible to improve
quality without a thorough understanding of how that system works. Moreover, the
Logical Thinking Process that is the subject of this book also provides a solid foundation
of understanding of the theory of knowledge: how we know what we know.

System

INPUTS

OUTPUTS

Feedback
Figure 1.1

A basic system and its environment.

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Introduction to the Theory of Constraints

THE SYSTEMS GOAL


Lets look at systems from a broader perspective. Why do systems exist? In the most basic
sense, the answer is, To achieve a goal. If a systems purpose is to achieve some goal,
who gets to decide what that goal should be? Obviously, in natural systems the answer
to this question is often beyond the scope of human understanding. But in human
organizational systems, which are the primary focus of this book, the goal setter ought to
be the systems owneror owners. If you or I paid for the system, wed expect to be the
one to decide what that systems goal should be. Privately held companies respond to the
directions of their owners. Publicly held corporations work toward the goals of their
stockholdersor at least theyre supposed to. Government agencies are essentially
owned by the taxpayers and should be doing what the taxpayers expect them to do.
The essence of management is recognizing the need for change,
then initiating, controlling, and directing it, and solving the
problems along the way. If it were not so, managers wouldnt
be neededonly babysitters.

THE MANAGERS ROLE


In most complex systems, the responsibility for satisfying the owners goals rests with
the managers of the systemfrom the chief executive officer down to the frontline
supervisor. In a general sense, the Theory of Constraints (TOC) is about management.

1. Anyone can make a decision, given enough facts.


2. A good manager can make a decision without enough facts.
3. A perfect manager can operate in perfect ignorance.
Spencers Laws of Data

Who Is a Manager?
Inevitably, some readers will respond, But Im not a manager. Why would the Theory of
Constraints be important to me? The truth is, were all managers. Everyone is a manager
of somethingin different arenas, perhaps, but a manager nonetheless. Whether youre
in charge of a large corporation, a department, or a small team, youre a manager. Even if
youre none of the above, youre still a manager. Under ideal circumstances, all
individuals manage their lives and careers, though sometimes they dont do a very
effective job of it.
Some of us have more than one management role. Basically, we differ only in our
span of control and the size of our sphere of influence. At the very least you manage (or
possibly fail to manage) your personal activities, your time, and perhaps your finances.
For example, a homemaker manages a household; a lawyer manages legal case
preparation and litigation; a student manages time and effort.
One of the hallmarks of effective managers is that they deal less with the present and
more with the future. In other words, they concentrate on fire prevention rather than
fire fighting. If youre more focused on the present than the future, youll always be in
a time lag, chasing changes in your environmenta reactive rather than a proactive mode.

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6 Chapter One

Have you seen them? Which way did they go? I must be after them,
for I am their leader!

What Is the Goal?


The Theory of Constraints rests on the admittedly somewhat rash assumption that
managers and/or organizations know what their real purpose is, what goal theyre trying
to achieve. Unfortunately, this isnt always the case. No manager can hope to succeed
without knowing four things:
What the ultimate goal is
What the critical success factors are in reaching that goal
Where he or she currently stands in relation to that goal
The magnitude and direction of the change needed to move from the status quo to
where he or she wants to be (the goal)
This might be considered management by vector analysis. But in fact thats really what
managers do: They determine the difference between what is and what should be, and
they change things to eliminate that deviation.
Average managers are concerned with methods, opinions, and
precedents. Good managers are concerned with solving problems.
Unknown

Goal, Critical Success Factor, or Necessary Condition?


If youre a manager, how do you know what the systems goal is? Frequently a systems
managersand perhaps even the ownershave different ideas about the systems goal.
In a commercial enterprise, the stockholders (owners) usually consider the systems goal
to be to make more money. The underlying assumption here is that a system making
money pays dividends to stockholders who, in turn, make more money.
The managers in a system might see the goal a little differently. While they
acknowledge the need to make money for the stockholders, they also realize that other
things are importantthings like competitive advantage; market share; customer
satisfaction; a satisfied, secure workforce; or first-time quality of product or service.
Factors like these often show up as goals in strategic or operating plans. But are they really
goals or are they necessary conditions?
For the purposes of this book, a goal is defined as the result or achievement toward which
effort is directed.19 But in complex systems we normally cant jump directly to desired
outcomes without satisfying some necessary conditions. A necessary condition is a
circumstance indispensable to some result, or that upon which everything is contingent.18
Inherent in these definitions is a prerequisite relationship: you must satisfy the necessary
conditions in order to attain the goal.
How many necessary conditions does it take to realize a goal? The answer is, It
dependson how detailed you want to be. Stephen Covey recommends beginning
with the end in mind.4:95 Thats obviously the goal itself, as weve defined it.
But if we conceive of the process of goal attainment as a journey rather than a
destination, there are clearly some intermediate progress milestones along the waysome
show-stoppers without which we wont be able to reach the goal. Normally there arent
too many of these. I submit that there are no more than three to five, and perhaps fewer
than three.

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Introduction to the Theory of Constraints

We could call these critical success factors (CSF). They are definitely necessary
conditions for goal attainment, but because theyre major milestones, there wont be very
many. Most of what people might consider necessary conditions actually support (are
required to satisfy) these critical success factors. As well see in Chapter 3, The
Intermediate Objectives Map, the goal, critical success factors, and subordinate necessary
conditions can be configured as a hierarchy.
Goldratt suggested that the relationship is actually interdependent, at least at the
goal-CSF level. In other words, if the systems owner decides to change the goalsay, to
one of the critical success factorsthe original goal cant be ignored. But it will most likely
revert to the CSF position vacated by the new goal. Because of this interdependency, the
goal is really no more than one of the systems constellation of critical success factors
that has been arbitrarily designated for primacy.
For example, your stockholders (represented by the board of directors) might decide
that increased profitability is the companys goal (see Figure 1.2). In this case, customer
satisfaction, technology leadership, competitive advantage, and improved market
share might all be necessary conditions that you cant ignore without the risk of not
attaining the profitability goal. But you might just as easily consider the goal to be
customer satisfaction, as many quality-oriented companies do these days. In this
instance, profitability becomes a necessary condition without which you cant satisfy
customers. Why? Because unprofitable companies dont stay in business very long, and
if theyre not in business, they cant very well satisfy customers.
The major difference between rats and people is that rats learn
from experience.
B. F. Skinner

CRITICAL
SUCCESS
FACTOR
CUSTOMER
SATISFACTION
CRITICAL
SUCCESS
FACTOR
HIGH DEMAND
(PRODUCT OR SERVICE)
GOAL

PROFITS

Which is which?
Does it matter?

Figure 1.2

Goal or critical success factor?

SECURE,
SATISFIED
WORKFORCE

CRITICAL
SUCCESS
FACTOR

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8 Chapter One

THE CONCEPT OF SYSTEM CONSTRAINTS


Lets assume for the moment that you, the manager, have decided what your systems
goal is and what the CSF and necessary conditions are for attaining it. Are you attaining
that goal right now? Most people would agree that they could be doing a better job of
progressing toward it.
What keeps your system from doing better? Would it be fair to say that something is
constraining your systemkeeping it from realizing its maximum potential? If so, what
do you think that constraining factor might be? The chances are that everybody in your
organization has an opinion about it. But whos right? And how would you know if
theyre right? If you can successfully answer that question, you probably have a bright
future ahead of you. Lets see if we can help you find that answer. To do this, well go
back to the concept of a system.

Systems as Chains
Goldratt likens systems to chains, or to networks of chains. Lets consider the chain in
Figure 1.3 a simple system. Its goal is to transmit force from one end to the other. If you
accept the idea that all systems are constrained in some way, how many constraints do you
think this chain has?

The Weakest Link


Lets say you keep increasing the force you apply to this chain. Can you do this
indefinitely? Of course not. If you do, eventually the chain will break. But where
will it breakat what point? The chain will fail at its weakest link (see Figure 1.3).
How many weakest links does a chain like this have? Oneonly one. There may be
another link or two that are very close in weakness, but there is only one weakest link.
The chain will fail first at only one point, and that weakest link is the constraint that
prevents the chain (system) from doing any better at achieving its goal (transmission
of force).

Figure 1.3

A system: the chain concept.

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Introduction to the Theory of Constraints

Constraints and Non-constraints


So we can conclude that our chain has only one link constraining its current performance.
How many non-constraints does it have? An indeterminate number, but equal to the
number of remaining links in the chain. Goldratt contended that there is usually only
one constraint in a system at any given time. Like the narrow neck of an hourglass, that one
constraint limits the output of the entire system. Everything else in the system, at that
exact time, is a non-constraint.
Lets say we want to strengthen this chain (improve the system). Where would be the
most logical place to focus our efforts? Rightthe weakest link. Would it do us any good
to strengthen anything except the weakest link (that is, a non-constraint)? Of course not.
The chain would still break at the weakest link, no matter how strong we made the others.
In other words, efforts on non-constraintsnearly all of a systemwill not produce
immediate, measurable improvement in system capability.
Now lets assume were smart enough to figure out which link is the weakest, and lets
say we double its strength. Its not the weakest link anymore. What has happened to
the chain? It has become stronger, but is it twice as strong? No. Some other link is now the
weakest, and the chains capability is now limited by the strength of that link. Its stronger
than it was, but still not as strong as it could be. The system is still constrained, but the
constraint has migrated to a different component.

A Production Example
Heres a different look at the chain concept (see Figure 1.4). This is a simple production
system that takes raw materials, runs them through five component processes, and turns
them into finished products. Each process constitutes a link in the production chain. The
systems goal is to make as much money as possible from the sale of its products. Each of
the component processes has a daily capacity as indicated. The market demand is 15 units
per day.
Where is the constraint in this chain, and why? The answer is Step C, because it can
never produce more than six units per day, no matter how many the rest of the
components produce. Where are the non-constraints? Everywhere else.
What happens if we improve the C process so that its daily capacity is now tripled,
to 18 units per day? What constrains the system now, and why? The answer is Step D,
because it can produce only eight units per day. Where are the non-constraints?
Everywhere else.

INPUTS

Step
A

Step
B

Step
C

Step
D

Step
E

Capacity:
10
Units/Day

Capacity:
20
Units/Day

Capacity:
6
Units/Day

Capacity:
8
Units/Day

Capacity:
9
Units/Day

What is the maximum system output per day?


Where is the weakest link? Why?

Figure 1.4

A production example.

OUTPUTS

MARKET
DEMAND:
15

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10 Chapter One

Lets continue this improvement process, until Steps D, E, and A are all much better
than before. Look at this new version of the production diagram (see Figure 1.5).
Wheres the systems constraint now? Its in the marketplace, which is only accepting
15 units per day. Weve finally removed the constraint, havent we? Well, not really. All
weve done is eliminate internal constraints. That which keeps our system from doing
better in relation to its goal is now outside the system, but its a constraint nonetheless. If
were going to attack this constraint, however, well need a different set of task skills
and knowledge.

RELATION OF CONSTRAINTS
TO QUALITY IMPROVEMENT
Deming developed 14 points that he offered as a kind of road map to quality.5 Most
other approaches to continuous improvement have comparable prescriptions for success.
Demings 14th point is, Take action to accomplish the transformation. He amplifies this
by urging organizations to get everyone involved, train everybody in the new philosophy,
convert a critical mass of people, and form process improvement teams.6:86-92
Management in most organizations interprets this point quite literally: Get everyone
involved. Employee involvement is a very important element of Demings theory, and of
most other total quality philosophies, and for good reason: Success is inherently a
cooperative effort. Most organizations having formal improvement efforts include
employees, in the process usually in teams.
Lets assume that these improvement teams are working on things that everybody
knows need improving. If we accept Goldratts contentions about constraints and nonconstraints, how many of these team efforts are likely to be working on non-constraints?
Answer: probably all but one (see Figure 1.6). How many of us know for sure exactly
where in our organizations the constraint lies? If our management isnt thinking in terms
of system constraints, yet theyre putting everybody to work on the transformation, how
much effort do you think might actually be unproductive?
Wait a minute, youre probably thinking. Continuous improvement is a long-term
process; it can take years to produce results. We have to be patient and persevere. Well
need all of these improvements someday.
Thats true. The way most organizations approach it, continuous improvement is a longterm process that may take years to show results. Limited time, energy, and resources are
spread across the entire system, instead of focused on the one part of it that has the potential
to produce immediate system improvement: the constraint. Impatience, lack of perseverance,
and failure to see progress quickly enough are all reasons why many organizations give up
on methods such as TQM and Six Sigma. Peopleincluding managerssoon get

INPUTS

Step
A

Step
B

Step
C

Step
D

Step
E

Capacity:
19
Units/Day

Capacity:
20
Units/Day

Capacity:
18
Units/Day

Capacity:
23
Units/Day

Capacity:
17
Units/Day

Now whats the maximum system output per day?


Now wheres the weakest link? Why?

Figure 1.5

Another version of the production example.

OUTPUTS

MARKET
DEMAND:
15

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11

Put Everybody to Work...


Process Improvement Teams

Figure 1.6

Who is working on a non-constraint?

discouraged when they see no tangible system results from the dedicated efforts theyve put
into process improvement. So interest, motivation, and eventually commitment to continuous
improvement die from a lack of intrinsic reinforcement. Everybody might be working
diligently, but only a few have the potential to really make a difference quickly. For most
organizations, the real question is: Will our business environment allow us the luxury of
time? Can we wait for the long term to see results?
Does it have to be this way? No. Goldratt developed the approach to continuous
improvement called the Theory of Constraints. He even wrote a book describing this
theory, called The Goal.11 Another, entitled Its Not Luck,10 demonstrates how the logical
tools of the theory might be applied. The Theory of Constraints (TOC) is a prescriptive
theory, which means it tells you not only whats holding your system back, but also what
to do about it and how to do it. A lot of theories answer the first questionwhats wrong.
Some even tell you what to do about it, but those that do usually focus on processes
rather than the system as a whole. And theyre completely oblivious to the concept of
system constraints.
There is no such thing as staying the same. You are either striving
to make yourself better or allowing yourself to get worse.
Unknown

CHANGE AND THE THEORY OF CONSTRAINTS


Deming talks about transformation, which is another way of saying change.
Goldratts Theory of Constraints is essentially about change. Applying its principles and
tools answers the four basic questions about change that every manager needs to know:
Whats the desired standard of performance?
What must be changed? (Where is the constraint?)
What is the appropriate change? (What should we do with the constraint?)
How is the change best accomplished? (How do we implement the change?)
Remember that these are system-level questions, not process-level. The answers to these
questions undoubtedly have an impact on individual processes, but theyre designed to
focus efforts in system improvement. Processes are important, but our organizations
ultimately succeed or fail as complete systems. What a shame it would be to win the battle
on the process level, only to lose the war at the system level!

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Why is the distinction between system and process so important? The answer lies in one
of the fundamental assumptions of systems theory: the whole is not equal to the sum of its
parts. The assumption that it is originates in a basic algebraic axiom. Unfortunately, however,
complex systems are anything but mathematically precise. The improper allocation of this
algebraic axiom to the management of organizations would sound like this:
If we break down our system into its components, maximize the
efficiency of each one, then reassemble the components, well have
the most efficient whole system.
Its been said that elegant theories are often slain by ugly, inconvenient facts. Thats
the case here. The mathematical, or analytical, approach to system improvement is one of
those victims. Its also been said that the devil is in the details. Where complex systems
are concerned, those details make up many of the aforementioned ugly, inconvenient
facts. And they are often in the linkages between system components, not in the
components (links) themselves. Yet organizations continue to blithely polish the efficiency
of these links, blissfully ignorant of the real location of the most vexing contributors to
less-than-desirable system performance: the interfaces among components.3:3-4
Most continuous improvement (CI) methods never adequately address how best to
channel improvement efforts for maximum immediate effect. In other words, by using
TOC in addition to CI methods such as Six Sigma, the problem of taking a long time to
show results goes away. Effectively applying TOC in concert with CI, youre likely to find
that CI and significant short-term results need not be mutually exclusive. So dont think
about throwing away your CI toolbox. If anything, the traditional CI tools become more
productive than ever, because TOC can suggest when and how to employ each one to
best effect: on the current (and sometime future) system constraint.
It is not necessary to change; survival is not mandatory.
W. Edwards Deming

TOC PRINCIPLES
Theories are usually classified as either descriptive or prescriptive. Descriptive theories,
such as the law of gravity, tell us why things happen, but they dont help us to do anything
about them. Prescriptive theories both explain why and offer guidance on what to do.
TOC is a prescriptive theory, but well look at the descriptive part first.
Several principles converge to make the environment particularly fertile ground for
the prescriptive part of Goldratts theory. The accompanying chart (see Figure 1.7) lists
most of these principles, but a few of them are worth emphasizing because of their striking
impact on reality.

Systems as Chains
This is crucial to TOC. If systems function as chains, weakest links can be found and
strengthened.

Local vs. System Optima


Because of the interdependence of system components and the effects of entropy, the
optimum performance of the entire system is not equivalent to the sum of all the

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13

Systems thinking is preferable to analytical thinking in managing change and solving problems.
An optimal solution deteriorates over time as the systems environment changes. A process of
ongoing improvement is required to update and maintain the effectiveness of a solutionor
replace it if it becomes irrelevant.
If a system is performing as well as it can, not more than one of its component parts will be
performing as well as they can. If all parts are performing as well as they can, the system as a
whole will not be. The system optimum is not the sum of the local optima.
Systems are analogous to chains. Each system has a weakest link (constraint) that ultimately
limits the success of the entire system.
Strengthening any link in a chain other than the weakest one does nothing to improve the
performance of the whole chain.
Knowing what to change requires a thorough understanding of the systems current reality, its
goal, and the magnitude and direction of the difference between the two.
Most of the undesirable effects within a system are caused by a few critical root causes.
Root causes are almost never superficially apparent. They manifest themselves through a number
of undesirable effects (UDEs) linked by a network of cause and effect.
Elimination of individual UDEs gives a false sense of security while ignoring the underlying critical
root causes. Solutions that do this are likely to be short-lived. Eliminating a critical root cause
simultaneously eliminates all resulting UDEs.
Root causes are often perpetuated by a hidden or underlying conflict. Eliminating root causes
requires challenging the assumptions underlying the conflict and invalidating at least one.
System constraints can either be physical or policy. Physical constraints are relatively easy to
identify and simple to eliminate. Policy constraints are usually more difficult to identify and
eliminate, but removing them normally results in a larger degree of system improvement than
elimination of a physical constraint.
Inertia is the worst enemy of a process of ongoing improvement. Solutions tend to assume a mass
of their own that resists further change.
Ideas are not solutions.

Figure 1.7

Partial list of TOC principles.

component optima. We saw this in the production example earlier. If all the components
of a system are performing at their maximum level, the system as whole will not be
performing at its best.

Cause and Effect


All systems operate in an environment of cause and effect. Something causes something
else to happen. This cause-and-effect phenomenon can be very complicated, especially
in complex systems.

Undesirable Effects and Critical Root Causes


Nearly all of what we see in our systems that we dont like are not problems, but indicators.
They are the resultant effects of underlying causes. Treating an undesirable effect alone is
like putting a bandage on an infected wound: It does nothing about the underlying
infection, so its remedial benefit is only temporary. Eventually the indication resurfaces,
because the underlying problem causing the indication never really went away.
Eliminating undesirable effects gives a false sense of security. Identifying and eliminating
a critical root cause not only eliminates all the undesirable effects that issue from it, but
also prevents them from returning.

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14 Chapter One

Solution Deterioration
An optimal solution deteriorates over time as the systems environment changes. Goldratt
once said, Yesterdays solution becomes todays historical curiosity. (Isnt that
interesting?! Why do you suppose they ever did that?) A process of ongoing improvement
is essential for updating and maintaining the efficiency (and effectiveness) of a solution.
Inertia is the worst enemy of a process of ongoing improvement. The attitude that, Weve
solved that problemno need to revisit it hurts continuous improvement efforts.

Physical vs. Policy Constraints


Most of the constraints we face in our systems originate from policieshow we
deliberately choose to operatenot physical things. Physical constraints are relatively
easy to identify and break. Policy constraints are much more difficult, but they normally
result in a much larger degree of system improvement than does the elimination of a
physical constraint.
An organization must have some means of combating the process
by which people become prisoners of their procedures. The rule
book becomes fatter as the ideas become fewer. Almost every
well-established organization is a coral reef of procedures that
were laid down to achieve some long-forgotten objective.
John W. Gardner

Ideas Are Not Solutions


The best ideas in the world never realize their potential unless theyre implemented. And
most great ideas fail in the implementation stage.

THE FIVE FOCUSING STEPS OF TOC


This is the beginning of the prescriptive part of the Theory of Constraints. Goldratt
developed five sequential steps to concentrate improvement efforts on the component
that is capable of producing the most positive impact on the system.11:300-308

1. Identify the System Constraint


What part of the system constitutes the weakest link? If its a physical constraint, what
policy is driving it?

2. Decide How to Exploit the Constraint


By exploit, Goldratt means we should wring every bit of capability out of the constraining
component as it currently exists. In other words, What can we do to get the most out of this
constraint without committing to potentially expensive changes or upgrades?
NOTE: The constraint, if physical, is the one place in the chain where efficiency
or productivity is paramount.

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15

3. Subordinate Everything Else


After weve identified the constraint (Step 1) and decided what to do about it (Step 2), we
adjust the rest of the system to a setting that will enable the constraint to operate at
maximum effectiveness. We may have to de-tune some parts of the system, while
revving up others. Inevitably, this means sacrificing the individual efficiencies of
non-constraints to some extent. However, care must be taken to assure that deliberate
detuning of a non-constraint doesnt actually turn it into the system constraint.
Once weve subordinated non-constraints, we must evaluate the results of our actions:
Is the constraint still constraining the systems performance? If not, weve eliminated this
particular constraint, and we skip ahead to Step 5. If it is, we still have the same
constraintand we continue with Step 4.

4. Elevate the Constraint


If were doing Step 4, it means that Steps 2 and 3 werent sufficient to eliminate the
constraint. We have to do something more. Its not until this step that we entertain the idea
of major changes to the existing systemreorganization, divestiture, capital improvements, or other substantial system modifications. This step can involve considerable
investment in time, energy, money, or other resources, so we must be sure we arent able
to break the constraint in the first three steps.
Its not uncommon for organizations that are not cognizant of constraint theory to
jump straight from Step 1 (Identify) to Step 4 (Elevate). The net effect is that more costs
are incurred, usually unnecessarily, and that opportunities to wring better performance
from the system at no additional cost are ignored or overlooked.
Elevating the constraint means that we take whatever action is required to eliminate
the constraint. When this step is completed, the initial constraint is broken, but some new
factor, within the system or outside of it, becomes the new system constraint.

5. Go Back to Step 1, But Beware of Inertia


If a constraint is broken at Steps 3 or 4 we must go back to Step 1 and begin the cycle
again, looking for the next thing constraining our performance. If youll recall the
production example (see Figure 1.5), this is exactly what we did. After we broke
the constraint at process Step C, we went back and found D, then E, then A, and, finally,
the marketplace.
The caution about inertia reminds us that we must not become complacent; the cycle
never ends. We keep on looking for constraints, and we keep breaking them. And we
never forget that because of interdependency and variation, each subsequent change
we make to our system will have new effects on those constraints weve already broken.
We may have to revisit and update those solutions, too.
The Five Focusing Steps have a direct relationship with the four management
questions pertaining to change: Whats the standard, what to change, what to change to,
and how to cause change? They tell us how to answer those questions.
To determine what to change, we look for the constraint. To determine what to change
to, we decide how to exploit the constraint and subordinate the rest of the system to that
decision. If that doesnt do the complete job, we elevate the constraint. The subordinate
and elevate steps also address the question how to cause the change.
This is all well and good, youre probably saying, but how do we convert these
abstract steps into concrete actions we can take? And how do we know when weve had
a positive impact on the system? These are two key questions. Lets look at the second
one first.

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THROUGHPUT, INVENTORY, AND OPERATING EXPENSE


A burning question we must address is, How do we know whether our constraintbreaking has had a positive effect on our overall system? Another way of asking this
same question is, How do we measure the effects of local decisions on the global
system? Organizations have struggled with this question for years. The Theory of
Constraints is particularly useful in this arena.
Part of the answer to the question lies in the TOC emphasis on fixing the weakest link
(constraint) and ignoring, at least temporarily, the non-constraints. Most effective laboratory
research involves quantifying the effect of a change in one variable by holding all the others
constantor as nearly so as possible. This is sensitivity analysis, and its particularly useful
in determining how much of an outcome is attributable to a particular cause.
By doing essentially the same thing in our organizations (that is, working only on the
constraint), we achieve two benefits: (1) we realize the maximum system improvement
from the least investment in resources, and (2) we learn exactly how much effect
improving a specific system component has on overall system performance. I suspect
Deming would consider this appreciation for a system7:96 of the highest order.
Goldratt conceived a simple relationship for determining the effect that any local
action has on progress toward the systems goal. Every action is assessed by its effect on
three system-level dimensions: Throughput, Inventory, and Operating Expense.11:58-62
Goldratt provides precise definitions of these terms (see Figure 1.8).
The concept of Throughput, Inventory/Investment, and Operating Expense has been
referred to by several names: throughput accounting, constraints accounting, and cash
flow accounting. Each of these terms is, in some way, descriptive of the desired function
of these metrics. Unfortunately, a detailed examination of this approach is beyond the
scope of this book. Readers are strongly encouraged to educate themselves about this
crucial topic. The two best of several sources for doing so are Management Dynamics by
John A. Caspari and Pamela Caspari 2 and Throughput Accounting by Steven M. Bragg.1

Throughput (T)
Throughput is the rate at which the entire system generates money through sales.11:58-62
Another definition of Throughput is all the money coming into the system. In for-profit
companies, Throughput is equivalent to marginal contribution to profit. In a not-for-profit
organization or a government agency, the concept of sales may not apply. In cases where
an organizations Throughput may not be easily expressed in dollars, it might be defined
in terms of the delivery of a product or service to a customer. Another way of thinking
about Throughput is
The world is not interested in the storms you encountered, but did
you bring in the ship?
William McFee

$$$
Throughput

$$$
Inventory

(Money coming IN)

(Money tied up INSIDE)

Figure 1.8

Definitions of Throughput, Inventory and Operating Expense.

Operating
Expense $$$
(Money going OUT)

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Inventory/Investment (I)
Inventory and Investment are all the money the system invests in things it intends to sell,
or all the money tied up within the system.12:58-62 Inventory includes the acquisition cost
of raw materials, unfinished goods, purchased parts, and other hard items intended
for sale to a customer. Investment includes the expenditures an organization makes in
equipment and facilities. Eventually, obsolescent equipment and facilities will be sold,
too, even if only at their scrap value. As these assets depreciate, their depreciated value
remains in the I column, but the depreciation is added to Operating Expense (see the
next section).

Operating Expense (OE)


Operating Expense is all the money the system spends turning Inventory into
Throughput. In other words, its the money going out of the system.12:58-62 Direct and
indirect labor, utilities, interest, and the like are examples of operating expenses.
Depreciation of assets is also considered an Operating Expense, because it constitutes the
value of a fixed asset expended, or used up, in turning Inventory into Throughput.
Goldratt contended that these dimensions are interdependent. That is, a change in
one will usually automatically result in a change in one or both of the other two. Lets
consider that for a minute. If you increase Throughput by increasing sales, Inventory and
Operating Expense will also increase. Why? Because youre likely to need more physical
inventory to support increased sales, and youre likely to spend more, in variable costs,
to produce more. Its also possible to make more money (if thats your goal) without
increasing sales. How? If you can produce the same sales revenues with less physical
inventory, and spend less on Operating Expense doing it, you get to keep more of the
money coming into the company (net profit).
So what would you, as a manager, try to do to improve your system? Obviously, you
would increase Throughput while decreasing Inventory and Operating Expense. And
here we have the key to relating local decisions to the performance of the entire system.
As you decide what action to take, ask yourself these questions:
Will it increase Throughput? If so, how?
Will it decrease Inventory? If so, how?
Will it decrease Operating Expense? If so, how?
If the answer to any of these questions is yes, go ahead with your decision (as long as
doing so doesnt compromise one or more of the other two), confident that the overall
system will benefit from it. If youre not sure, perhaps youd better re-evaluate. The
bottom line is that if it doesnt eventually result in increased Throughput, youre wasting
your timeand probably your money.

Which Is Most Important: T, I, or OE?


To improve your system, where should you focus your efforts? On T, I, or OE? Consider
the example in Figure 1.9. The choices are to focus on decreasing OE, decreasing I, or
increasing T.
As you look at the graph, note that the theoretical limit in reducing OE and I is zero.
A system cant produce output with no physical inventory and no Operating Expense, so
the practical limits of I and OE are somewhat above zero. Theoretically, theres no upper
limit to how high you can increase T, but from a practical standpoint there is a limit to the
size of your market. But still, its highly probable that the potential for increasing T will
always be much higher than the potential for decreasing I and OE. Consequently, it makes

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18 Chapter One

(Theoretical
Limit)

x, y = potential decrease
z = potential increase

Practical
Limit

x
y

(Theoretical
Limit)

OE

Decreasing OE and I reaches a practical limit LONG before the limit of increased T
Decreasing OE and I below practical limits degrades ability to generate T

Figure 1.9

Limits to T, I, and OE.

sense to expend as much effort as possible on activities that tend to increase T, and make
reduction of I and OE a secondary priority (see Figure 1.10).
But whats the normal priority of most companies in a competitive environment? Cut
costs (Operating Expense) first. Then, maybe, reduce physical inventory (often without
considering how far it can be reduced without hurting Throughput). And finally, try to
increase throughput directly.

T, I, and OE: An Example


A classic example is the American aerospace defense industry. Traditionally, these
companies have depended on huge government contracts to keep them going. As the
defense budget dramatically declined in the early 1990s, fewer contracts were awarded,
and for much smaller production runs. In most cases, the remaining defense business of
these companies was not enough to keep the organization, as originally structured, afloat.
So what was the response of these companies? Most took the traditional approach to some
extent: cut fixed costs (Operating Expense). They laid off thousands of workers. Some

T
Maximize
T

Figure 1.10

I
Minimize
I

Management priorities with T, I, and OE.

OE
Minimize
OE

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even reduced Investment by selling off plants, warehouses, or other physical assets. But
even that wasnt enough for certain companies, so they merged with others to
strengthen their capacity to bid for whatever defense business remained. A few
companies, however, have seen the handwriting on the wall. With the bottom not yet in
sight, they couldnt continue to cut physical inventory or Operating Expense, so they
opted to do what they probably should have done in the first place: look for ways to
increase Throughput.
How? By finding new market segments for their core competencies, markets that
dont depend on government contracts. One satellite builder found a market for its data
technology in credit reporting and for its electronic technology in the automotive industry.
Another defense electronics firm diversified into consumer communications: home
satellite television and data communication. In both cases, the companies found new ways
to increase Throughput, rather than just reducing Operating Expense and Inventory.*

T, I, and OE in Not-for-Profit Organizations


A common question often asked is, What about organizations in which making more
money, now and in the future isnt the goalas with charitable foundations, government
agencies, and some hospitals? How do T, I, and OE apply to them?
Its true that Goldratt conceived of Throughput, Inventory (or Investment), and
Operating Expense as ways to measure an organizations progress toward its goal.
However, when he created these measures, he was focusing exclusively on for-profit
companies. In such organizations, money is an effective surrogate measure for almost all
critical aspects of system-level performance, especially those pertaining to the
organizations goal.
But its clearly different in the case of a not-for-profit or government agency. Since
that kind of organizations goal is not to make more money, now and in the future, the
financial expression of Throughput loses significance. So, how can we measure progress
toward our goal if were a not-for-profit organization?
A variety of alternatives has been suggested to modify expressions of T, and the
variable elements of I, so that they accurately reflect progress toward a non-monetary
goal. The problem with almost all of these alternatives is that theyre contrivedan
attempt to fit not-for-profits into a metrics box they were never intended to occupy.
Goldratt himself has offered what may be the best solution to the problem of assessing
the progress of not-for-profits toward their goals. In July of 1995 he made the following
observations.18 Figure 1.11 illustrates his concept.

Universal Measures of Value


In recorded history, money has been the closest thing to a universal measure of value that
humankind has ever created. Where it applies completely, its very effective. But because
its not always a valid measure of value, and since no other universal non-monetary
measure of value has been invented, a different scheme for not-for-profits should be
employed.
Goldratt suggested a dual approach. Operating Expense is still measurable in
monetary terms; inventory, only partially so; and Throughput, not at all. Inventory, he
proposed, should be differentiated as either passive or active.

* A more detailed treatment of T, I, and OE can be found in three other sources: The Haystack Syndrome12
by Goldratt and Management Dynamics2 by the Casparis and Throughput Accounting1 by Bragg.
(1990, 2004, and 2007 respectively).

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20 Chapter One

Operating
Budget

$$
$$

$ OE
$ $$$

Ip

Ia

= Value

Customers

Figure 1.11

T, I, and OE in a not-for-profit organization.

Passive Inventory
Passive inventory, as the name implies, is acted upon. In the manufacturing model,
passive inventory would be the raw materials that are converted into Throughput. But in
a not-for-profit (a hospital, for example), passive inventory isnt measurable in monetary
terms because the raw materials are often people. Figure 1.11 shows customers
(patients) going through the non-monetary side of the system and becoming
Throughput: well people.

Active Inventory (Investment)


Active inventory might actually be better defined as investment. It is measurable in
monetary terms, because it constitutes the facilities, equipment, and tangible assets that
act upon the passive inventory. This part of the inventory is shown in the upper right
portion of the system in Figure 1.11.
So how should managers of not-for-profits adjust their focus? In principle, the
emphasis remains the same: increase Throughput, limit Investment, and decrease
Operating Expensein that order. In practice, Investment and Operating Expenseboth
expressed in monetary termsare managed the same way they are in for-profit companies.
The difference arises in how we should manage Throughput and passive inventory.

Managing T Through Undesirable Effects


Without a universal non-monetary measure of value, Goldratt maintained that measuring
T and passive I in not-for-profits isnt ever likely to be practical. So, he says, dont bother
trying to do it. Instead, work on eliminating the undesirable effects (UDE) associated with

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Introduction to the Theory of Constraints

21

Throughput. (Refer to Chapter 4, Current Reality Trees, for a thorough discussion of


undesirable effects and their relationship to root causes.) Use UDEs as your indicators of
progress. As you eliminate them, progress toward the organizations goal can be assumed.
In summary, a not-for-profit should search out and correct the causes of UDEs
affecting Throughput, while keeping the costs of Investment and Operating Expense
down (refer to Figure 1.11). But the primary emphasis should always be on the former, not
the latter.
NOTE: Many people will inevitably ask, What about the operating budget of
a not-for-profit? Where does that fit into the T, I, and OE formulation? It isnt
in Throughput, because production efforts arent aimed at increasing it. And it
isnt really an Operating Expense alone, because some part of it is spent on
capital improvements, which are really Inventory (Investment). The answer,
according to Goldratt, is that the annual operating budget should be considered
a necessary condition. Efforts to reduce active Inventory and Operating Expense
will naturally have a beneficial effect on the annual budget. But the budget is
the means to an enda necessary conditionnot the goal.

THE TOC PARADIGM


The Theory of Constraints is considerably more than just a theory. In effect, its a
paradigm, a pattern or model that includes not only concepts, guiding principles, and
prescriptions, but tools and applications as well.
Weve seen its concepts (systems as chains; T, I, and OE) and its principles (cause and
effect, local vs. system optima, and so on). Weve examined its prescriptions (the Five
Focusing Steps; what to change, what to change to, how to change). To complete the
picture, well consider its applications and tools.

Applications and Tools


Each application of TOC starts out being unique. As the theory is applied in a new
situation, it creates a distinctive solution. Often, however, such solutions can be
generalized to a variety of other circumstances.

Drum-Buffer-Rope
For example, in The Goal, Goldratt describes a TOC solution to a production control
problem in a specific plant of a fictitious company. This solution became the basis for a
generic solution applicable to similar production situations in other industries. Goldratt
called this production control solution drum-buffer-rope.5,13,17 Many companies have
applied this solution, originally developed to solve one companys problem, with great
success. Consequently, drum-buffer-rope, which began as an application of TOC
principles, has become a tool in the TOC paradigm.

Critical Chain Project Management


A natural extension of the drum-buffer-rope concept to project management is called
critical chain.9,14,15,16 Whereas production is repetitive, projects are usually one-time
deliveries; some of the elements of drum-buffer-rope required modification before they
could be applied to managing projects. But the basics are similar. Critical chain, perhaps
to an even greater extent than drum-buffer-rope, has become a widespread way of
ensuring shorter project durations and a higher probability of delivering them on time.

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Replenishment and Distribution


Just as the drum-buffer-rope concept was extended to project management, so too has it
been applied to manufacturers raw material acquisition management and finished goods
distribution. Combined with drum-buffer-rope, the TOC replenishment and distribution
tool can make for a fast, streamlined supply chain. As of this writing, there is not much
formally published about it beyond a few conference papers.

Throughput Accounting
Another tool is called Throughput accounting. This is a direct outcome of the use of
Throughput, Inventory, and Operating Expense as management decision tools, as
opposed to traditional management cost accounting.1,2 Throughput accounting basically
refutes the commonly used concept of allocating fixed costs to units of a product or
service. While the summary financial figures remain essentially the same, the absence of
allocated fixed costs promotes very different management decisions concerning pricing
and marketing for competitive advantage. In other words, Throughput accounting is a
much more robust approach for supporting good operational decisions than standard
cost accounting. As with drum-buffer-rope production control, throughput accounting
began as a specific solution to one companys system performance measurement problem
and ended up applicable to any companys measurement problems.

The Logical Thinking Process


The Thinking Process Goldratt developed to apply TOC is logical by nature. The drumbuffer-rope, critical chain project management, supply chain, and throughput accounting
tools all have foundations in the logic of cause and effect. But that logic isnt necessarily
intuitive, and it certainly doesnt spring fully formed, like Pegasus from the head of
Medusa. Rather, this logic finds its expression in another TOC toolthe most universal
of them allthe Logical Thinking Process.
The Thinking Process comprises six* distinct logic trees and the rules of logic that
govern their construction. The trees include the Intermediate Objectives Map, the Current
Reality Tree, the Evaporating Cloud, the Future Reality Tree, the Prerequisite Tree, and the
Transition Tree. The rules are called the Categories of Legitimate Reservation. These trees,
the Categories of Legitimate Reservation, and how to use them, are the subject of this book.

THE INTERMEDIATE OBJECTIVES MAP


The Intermediate Objectives (IO) Map is a destination finder. Stephen R. Covey
contends that one should always begin any endeavor with the end in mind.4:95 The
IO Map (see Figure 1.12) helps problem solvers to do that.

* Originally, Goldratt conceived of only five tools. In the mid-1990s, he briefly dabbled with the
idea of another logical aid he referred to as an Intermediate Objectives (IO) Map, but he never
continued with a concerted effort to develop and use it. In my strategy development work,
I found the IO Map to be not just useful, but critical to success. (See Dettmer, Strategic Navigation,
Quality Press, 2003.) 8 It became apparent that it was equally useful for the kind of system problem
solving for which the Thinking Process was originally conceived. The IO Map concept is fully
developed, explained, and illustrated in this edition for the first time.

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Introduction to the Theory of Constraints

23

GOAL

CSF

NC

CSF

CSF

NC

NC

NC

NC

GOAL = System goal


CSF = Critical success factor
NC = Subordinate necessary condition

Figure 1.12

The Intermediate Objectives Map.

It begins with a clear, unequivocal goal statement and the few critical success factors
that are required to realize it. It then provides a level or two of detailed necessary
conditions for achieving those critical success factors.
These elements are structured in a tree that represents the normative situation for the
systemwhat should be happening, or what we want to be happening. The IO Map
provides the benchmark for determining how big the deviation is between what is
happening in the system and what should be happening. Chapter 3 describes the IO Map
in detail and provides comprehensive instructions for constructing one.

THE CURRENT REALITY TREE


The Current Reality Tree (CRT) is a gap-analysis tool (see Figure 1.13). It helps us examine
the cause-and-effect logic behind our current situation and determines why that situation
is different from the state wed prefer to be in, as expressed in the IO Map.
The CRT begins with the undesirable effects we see around usdirect comparisons
between existing reality and the terminal outcomes expressed in the IO Map. It helps us
work back to identify a few critical root causes that originate all the undesirable effects
were experiencing. These critical root causes inevitably include the constraint were trying
to identify in the Five Focusing Steps.
The CRT tells us what to changethe one simplest change to make that will have the
greatest positive effect on our system. Chapter 4 describes the Current Reality Tree in
detail and provides comprehensive instructions and examples on how to construct one.

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THE EVAPORATING CLOUD:


A CONFLICT RESOLUTION DIAGRAM
Goldratt designed the Evaporating Cloud (EC), which amounts to a conflict resolution
diagram, to resolve hidden conflicts that usually perpetuate chronic problems (see
Figure 1.14). The EC is predicated on the idea that most core problems exist because some
underlying tug-of-war, or conflict, prevents straightforward solution of the problem;
otherwise, the problem would have been solved long ago. The EC can also be a creative
engine, an idea generator that allows us to invent new, breakthrough solutions to such
nagging problems. Consequently, the EC answers the first part of the question, what to
change to. Chapter 5 describes the Evaporating Cloud in detail.

UNDESIRABLE
EFFECT
(UDE)
UNDESIRABLE
EFFECT
(UDE)

UNDESIRABLE
EFFECT
(UDE)

UNDESIRABLE
EFFECT
(UDE)

Critical
Root
Cause

Figure 1.13

The Current Reality Tree.

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Introduction to the Theory of Constraints

Prerequisite
#2

Requirement
#2

Objective

INJECTION

Requirement
#2

Figure 1.14

25

(Conflict)

Prerequisite
#2

The Evaporating Cloud (conflict resolution diagram).

THE FUTURE REALITY TREE


The Future Reality Tree (FRT) serves two purposes (see Figure 1.15). First, it allows us to
verify that an action wed like to take will, in fact, produce the ultimate results we desire.
Second, it enables us to identify any unfavorable new consequences our contemplated
action might have, and to nip them in the bud.
These functions provide two important benefits. We can logically test the effectiveness of our proposed course of action before investing much time, energy, or resources in
it, and we can avoid making the situation worse than when we started.
This tool answers the second part of the questionwhat to change toby validating
our new system configuration. The FRT can also be an invaluable strategic planning tool.
Chapter 6 describes the Future Reality Tree in detail, providing examples and comprehensive instructions on how to create one.

THE PREREQUISITE TREE


Once weve decided on a course of action, the Prerequisite Tree (PRT) helps implement
that decision (see Figure 1.16). It tells us in what sequence we need to complete the discrete
activities in implementing our decision. It also identifies implementation obstacles and
suggests the best ways to overcome those obstacles. The PRT provides the first part of the
answer to the last question, how to change. Chapter 7 describes the Prerequisite Tree in
detail and provides both examples and comprehensive procedures for constructing one.

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26 Chapter One

DESIRED
EFFECT
(DE)
DESIRED
EFFECT
(DE)

DESIRED
EFFECT
(DE)

DESIRED
EFFECT
(DE)
INJECTION
#3

INJECTION
#2

INJECTION
#1

Figure 1.15

The Future Reality Tree.

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Introduction to the Theory of Constraints

27

OBJECTIVE
(INJECTION)

Obstacle

Obstacle

Intermediate
Objective

Intermediate
Objective

Intermediate
Objective

Obstacle

Obstacle

Intermediate
Objective
Intermediate
Objective

Intermediate
Objective

Obstacle

Intermediate
Objective

Figure 1.16

Obstacle

Intermediate
Objective

The Prerequisite Tree.

THE TRANSITION TREE


The last of the six logical tools is the Transition Tree (TT) (see Figure 1.17). The TT was
designed to provide detailed step-by-step instructions for implementing a course of
action. It provides both the steps to take (in sequence) and the rationale for each step. The
TT could be considered a detailed road map to our objective. It answers the second part
of the question, how to change. Chapter 7 also describes the Transition Tree.
NOTE: With this edition, a comprehensive examination of the Transition Tree
and instructions for constructing it are omitted. A historical perspective for
doing so is provided in Chapter 7. Instead of a Transition Tree, a three-phase
project management approach to implementing policy changes is introduced.

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OBJECTIVE
(INJECTION)

Figure 1.17

Unfulfilled
need

Expected
effect

Action
#4

Unfulfilled
need

Expected
effect

Action
#3

Unfulfilled
need

Expected
effect

Action
#2

Existing
condition

Unfulfilled
need

Action
#1

The Transition Tree.

THE CATEGORIES OF LEGITIMATE RESERVATION


The Categories of Legitimate Reservation (CLR) are the logical glue that holds the trees
together. Essentially, they are eight rules, or tests, of logic that govern the construction
and review of the trees. To be logically sound, a tree must be able to pass the first seven
of these tests. The eight CLR include:
1. Clarity
2. Entity existence
3. Causality existence
4. Cause sufficiency
5. Additional cause
6. Cause-effect reversal
7. Predicted effect existence
8. Tautology (circular logic)

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29

We use the CLR as we construct our trees to ensure that our initial relationships are
sound. We use the CLR after the tree is built to review it as a whole. We use the CLR to
scrutinize and improve the trees of others (and they to review ours). And, most important,
we use the CLR to communicate disagreement with others in a non-threatening way,
which promotes better understanding rather than animosity. Chapter 2 describes the CLR
in detail, gives examples of their application, and provides instructions on how to
scrutinize your own trees as, or after, you build them.

THE LOGICAL TOOLS AS A


COMPLETE THINKING PROCESS
Each of the six logical tools can be used individually or they can be used in concert, as an
integrated thinking process. Recall that earlier we discussed TOC as a methodology for
managing change. The four basic questions a manager must answer about change (what
is the standard, what to change, what to change to, and how to cause the change) can be
answered using the logical tools as an integrated package. Figure 1.18 shows the
relationship of the logical tools to the four management questions about change.
State of Change

Applicable Logic Tree

Whats the desired standard?

Intermediate Objectives Map

What to change?

Current Reality Tree

What to change to?

Evaporating Cloud, Future Reality Tree

How to cause the change?

Prerequisite Tree, Transition Tree

Figure 1.18

How the logic trees relate to four management questions about change.

Figure 1.19 shows a general overview of how each tool fits together with the others
to produce an integrated thinking process. Non-quantifiable problems of broad scope and
complexity are particularly prime candidates for a complete thinking process analysis.
The rest of this book is devoted to explaining how the six logic trees and the Categories
of Legitimate Reservation are used.

It is wise to keep in mind that no success or failure is


necessarily final.
Unknown

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30 Chapter One

Intermediate
Objectives Map

Current Reality Tree

Evaporating Cloud

Goal

Undesirable Effects

Objective

Critical Success Factors

Intermediate Effects

Requirements

Supporting Necessary
Conditions

Root Causes

Prerequisites

Transition Tree

Prerequisite Tree

Future Reality Tree

Objective (Injection)

Objective (Injection)

Desired Effects

Intermediate Effects

Obstacles, Intermediate
Objectives

Intermediate Effects

Action

Figure 1.19

Injections

The six logical tools as an integrated thinking process.

ENDNOTES
1. Bragg, Steven M. Throughput Accounting: A Guide to Constraint Management. Hoboken, NJ: John
Wiley and Sons, 2007.
2. Caspari, John A., and Pamela Caspari. Management Dynamics: Merging Constraints Accounting
to Drive Improvement. Hoboken, NJ: John Wiley and Sons, 2004.
3. Cilliers, Paul. Complexity and Postmodernism: Understanding Complex Systems. NY: Routledge
(Taylor and Francis Group), 1998.
4. Covey, Stephen R. The Seven Habits of Highly Effective People: Powerful Lessons in Personal Change.
NY: Simon and Schuster, 1989.
5. Cox, James F., III, and Michael S. Spencer. The Constraints Management Handbook, Boca Raton,
FL: The St. Lucie Press, 1998.
6. Deming, W. Edwards. Out of the Crisis. Cambridge, Mass.: MIT Center for Advanced
Engineering Study, 1986.
7. ______. The New Economics for Industry, Government, Education. Cambridge, Mass.: MIT Center
for Advanced Engineering Study, 1993.
8. Dettmer, H. William. Strategic Navigation: A Systems Approach to Business Strategy. Milwaukee,
WI: ASQ Quality Press, 2003.
9. Goldratt, Eliyahu M. Critical Chain, Great Barrington, MA: North River Press, 1997.
10. ______. Its Not Luck, Great Barrington, MA: North River Press, 1994.
11. ______. The Goal, 2nd ed. Great Barrington, MA: North River Press, 1992.
12. ______. The Haystack Syndrome, Croton-on-Hudson, NY: North River Press, 1990.
13. ______ and Robert E. Fox. The Race, Croton-on-Hudson, NY: North River Press, 1987.
14. Leach, Lawrence P. Critical Chain Project Management, Boston, MA: Artech House, 2000.
15. ______. Lean Project Management: Eight Principles for Success. Boise, ID: Advanced Projects
Institute, 2005.
16. Newbold, Robert C. Project Management in the Fast Lane, Boca Raton, FL: St. Lucie Press,
17. Schragenheim, Eli, and H. William Dettmer. Manufacturing at Warp Speed, Boca Raton, FL: The
St. Lucie Press, 2000.
18. Source: Message posted to the TOC-L Internet Discussion List, July 19, 1995, SUBJ: T, I, and
OE in Not-For-Profit Organizations, summarizing a conversation between Dr. Eliyahu M.
Goldratt and the author on July 16, 1995, and posted at Dr. Goldratts request.
19. http://dictionary.reference.com/browse/goal